Safe have currencies were the top dogs this week as forex traders seemed to have leaned risk-off. Continued coronavirus pandemic uncertainty and negative headlines out of China were the likely main drivers, with inflation and central bank policy speculation not too far behind as possible secondary market drivers.
Notable News & Economic Updates:
Intermarket Weekly Recap
This week’s risk sentiment vibes looks to be one of risk-off, likely influenced by the never-ending pandemic uncertainty, as well as bearish economic updates & news from China (e.g., Chinese retail sales 2.5% y/y vs. 6.9% forecast; Goldman Sachs, JPMorgan warn of Evergrande’s debt woes spillover risks).
But in terms of overall price action, the different asset classes seemed to have moved to the beat of their own drums. While the the Dollar out performed and equities fell in line with broad risk sentiment, oil bucked the usual tendencies as U.S. oil inventories continue to fall. Gold was also an odd ball this week, starting its downtrend on Tuesday despite the broad risk-off vibes, possibly reacting to Dollar strength and the rise in bond yields.
Crypto traders moved mostly net negative, an understandable bias given that most news flow from the space was net negative. On top of continued regulations fears the have been plaguing the space recently, we also saw fake Litecoin/Walmart partnership news, Solana going dark for almost an entire day, and insider trading at NFT platform OpenSea to push many crypto assets into the red. Alt coins bore the brunt of the bearishness, likely pushing traders to the crypto kings BTC and ETH (up +6.30% and +4.66% respectively) on Friday.
In the foreign exchange space, the U.S. dollar and Japanese yen out performed the rest of the majors, typical results in a risk-off environment. The U.S. dollar also benefitted greatly from the positive U.S. retail sales data update, launching it higher on Thursday, as well as drawing in safe haven hunters on rising contagion concerns from the potential Evergrande debt default situation in China.
The Swiss franc was the biggest loser of the week, an odd result given that a general risk-off lean usually benefits CHF. There doesn’t seem to be a direct catalyst, but the bearish turn on Wednesday and Thursday seems to correlate with a downgraded economic forecast from the Swiss government. It’s also possible that comments from SNB Vice Chairman Fritz Zurbruegg last week that the franc is still highly valued may have continued its influence this week.
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