The U.S. Dollar took the top spot this week among the major currencies, likely benefitting from the risk aversion environment fueled by the Delta variant’s impact on the economy. It’s also likely traders picked up some Greenbacks after the steady flow of comments from several Fed members that Tapering may be coming soon.
Notable News & Economic Updates:
Intermarket Weekly Recap
Risk aversion sentiment kicked off early in the week, likely on the continued theme that the recent rise in Delta variant cases may slow down the economy recovery. This was re-enforced last Friday with a highly disappointing U.S. employment report, as well as updated outlooks from analysts lowering their growth outlooks after that event.
We also got economic and monetary policy statements from several major central banks, all basically saying that recent economic data has been highly encouraging but the outlook remains foggy due to the pandemic. Following that sentiment, central bank actions and rhetoric diverged as we saw the Reserve Bank of Australia postpone tapering plans, the Bank of Canada hinted at raising rates, and the European Central Bank tapered the pandemic emergency purchase program only.
And while there was no official statement from the U.S., several Fed members gave speeches this week that highly favored tapering in the U.S. sometime this year. These comments, plus the general risk-off vibes, were likely the drivers for the strength in the U.S. dollar and weakness in U.S. equities and gold.
Crypto markets were, as usual, the biggest movers this week, this time off of a flash crash in bitcoin from around $52K to just below $43K on the same day that El Salvador makes bitcoin legal tender. Was this historical event the catalysts? No one knows, but analysts put the blame on overleveraged traders in the bitcoin derivatives markets.
The action in the forex markets were relatively quiet once again despite a round of monetary policy statements from the major central banks. Again, the Greenback took the top spot with the main focus on the pandemic/future growth concerns, while the Aussie was the the biggest loser by the Friday close. Not only did Aussie bulls suffer from the risk-off environment, but it’s also likely the RBA’s decision to postpone the taper played a key role in AUD’s unrecoverable bearish turn on Tuesday.