Weekly Forex Market Recap: Aug. 23 – 27

It was a relatively quiet and mixed week for the financial markets as traders awaited the Jackson Hole Economic Symposium. Traders leaned risk-on leading into the event, and then went full blast on risk after Powell’s speech on Friday. This reaction solidified the Comdolls as the top gainers and the safe havens as the biggest losers into the weekend.

Notable News & Economic Updates:

Intermarket Weekly Recap

Dollar, Gold, S&P 500, 10-yr Treasury Yield, Oil, Bitcoin Overly 1-Hour

The Jackson Hole Economic Symposium was the big scheduled risk event of the week, although it usually hasn’t been a big catalyst for volatility in years past. Still though, being a meeting of the world’s top monetary and financial policy figureheads, it’s an event most traders are well aware of and likely stayed relatively inactive in case there is a big surprise.

Since Jackson Hole didn’t start until Thursday, market price action among the different asset classes was mixed, but seemed to have started out with a uniform “risk-on” lean on Monday, possibly a reaction to net positive covid-19 related headlines (e.g., China reports no new local Covid-19 cases for first time since July, FDA grants full approval to Pfizer-BioNTech’s Covid shot). This positive sentiment persisted for the rest of the week, despite the latest business sentiment data showing arguably declining optimism around the globe.

Risk-on sentiment kicked into overdrive on Friday after Fed Chair Jerome Powell gave his speech at the Jackson Hole event, effectively re-iterating that the Fed was a long way away from raising interest rates and that there was still no rush to tapering bond-buying operations. The U.S. dollar and bond yields immediately fell on that sentiment, lifting all other asset classes, including counter currencies and gold.

Oil was a big outperformer, likely on the latest positive covid-19 updates, and arguably on Middle East tensions (U.S. on alert for more Kabul attacks, says next few days will be most dangerous) and the potential for oil operation disruptions in Gulf of Mexico from Hurricane Ida.

Crypto assets diverged from the risk-on sentiment influence, and from a heavy flow of arguably bullish headlines from the crypto space (e.g., PayPal launches its cryptocurrency service in the UK, Citi considering bitcoin futures trading for some institutional clients, Europe’s First Bitcoin Futures to List on Eurex in September, etc.) by moving lower early in the week. This broad pullback could have been a technical retracement after the massive recovery from the July lows, but it looks like the Jackson Hole reaction is helping the crypto space recover some of its earlier losses for the week.

In the forex space, there weren’t any major catalysts for currencies outside of the Jackson hole meeting, which is likely why we saw the Comdolls riding the positive risk sentiment wave to wins for the week. The Kiwi took the top spot, likely with help from positive economic from New Zealand, while traders ran from the savings, with the Japanese yen taking the biggest hits of the week.