The world’s reserve currency was on a strong uptrend last week, reaching its highest level since September 2020. Investors were active buyers of the US dollar when the country’s equity indices corrected and the S&P500 was briefly down more than -6% on Friday from its all-time high reached the beginning of September.

USD

US economic data remained good and strong and pointed to continued positive sentiment among the population and businesses. The ISM purchasing managers’ index for the manufacturing sector stood at 61.1 points, up moderately from the previous month’s reading of 59.9. The country’s consumer price index (PCE) showed a 4.3% annual increase in August, pointing to continued price growth in the economy. The consumer confidence Index stood at 109.3 points and fell for the 4th consecutive month. Meanwhile, the real estate market remains strong and active and the house price index was 19.2% higher than in the same period a year ago, which is likely to contribute to high inflation rates in the coming months. The number of new jobless claims continued to rise from 0.351 million to 0.362 million during the week.

The global trend showed a further slowdown, with the weekly average of new cases falling from 482 to 434 thousand per day. North America and Asia continued to see a decline in the number of cases, while Europe stood out and showed an increase of around 8% per week. Only in the US did the data point to an emerging wave of cases, with the average dropping from 122 to 98 thousand per day. The number of vaccines administered increased from 389 to 395 million, with a change of 6 million, mainly due to the third dose. Overall in the US, the number of people vaccinated with at least one dose rose from 64.1% to 64.7% of the population, with a weekly increase of 0.6%. In Lithuania, the number of people vaccinated with at least one dose rose from 62.0% to 62.7%, a difference of 0.7%.

EUR

The main currency pair EUR/USD mirrored the trend of the US dollar and temporarily depreciated in the second half of the week to the level of 1.157, the lowest level since July 2020. Economic data on the Old Continent included the actual manufacturing purchasing managers’ indices, which stood at 58.4 points in Germany and 58.6 in Europe, both pointing to further growth. Germany’s preliminary September annual inflation rate was 4.1%, up from 3.9% in the previous month, while the country’s retail sales were 1.1% higher than a year earlier. Europe’s preliminary annual inflation rate was 3.4%. German labour market data showed positive trends, with the number of unemployed declining by 30 thousand in September and the unemployment rate at 5.5%. The EUR/USD pair ended the week’s trading down -1.1%.

JPY

The most important Asian pair USD/JPY appreciated in the first half of the week and reached the level of 112.0, but later depreciated to 111.0 points. The data included August industrial production, which showed a 9.3% year-on-year rise, and retail sales, which were -3.2% lower than a year earlier. The actual purchasing managers’ index was 51.5 points. USD/JPY ended the week trading up 0.3%.

GBP

The British pound/US dollar pair moved in tandem with the currency market and was briefly depreciated to the level of 1.342 on Wednesday. No important economic data were released. GBP/USD ended the week’s trading down -1.0%.

Economic Events

This week will start quietly and no important data is scheduled for Monday. On Tuesday, the actual purchasing managers’ indexes for the service sector will be released and US international trade data will be expected. On Wednesday, European retail sales will be watched, Thursday will be quite quiet, but on Friday investors will be focused on the US labour market indicators.

According to Admiral Markets market sentiment data, 81% of investors have long positions in the EUR/USD pair (up +11 percentage points compared to last week). In the main Asian pair USD/JPY, 24% of investors have long positions (up +15 percentage points). In GBP/USD, 56% of participants expect a rise (down -12 percentage points). Such market data is interpreted as a contrarian indicator, and therefore EUR/USD and GBP/USD are expected to fall, while USD/JPY is expected to appreciate. The analysis of positioning data should be combined with fundamental projections and technical analysis.

Source: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

INFORMATION ABOUT ANALYTICAL MATERIALS: 

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following: 

• This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research. 
• Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content. 
• With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest. 
• The Analysis is prepared by an independent analyst, Skirmantas Paulavicius (analyst), (hereinafter “Author”) based on their personal estimations. 
• Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. 
• Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed. 
• Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.