Weekly Forex Market Recap: Aug. 9 – 13

With a lack of fresh catalysts to fire up some action, major currencies traded in a tight range this week. But it looks like there was enough in the news cycle the comdolls were able to take the lead while the Swiss franc takes the ‘biggest loser’ honors.

Notable News & Economic Updates:

Intermarket Weekly Recap

Dollar, Gold, S&P 500, 10-yr Treasury Yield, Oil

It looks like a case of the Summer doldrums in the financial markets this week, characterized by relatively low volatility and choppy price action across most of the major asset classes. The global economic calendar was relatively light on major updates and the news cycle was nearly void of shocking headlines to get any momentum started. Fortunately for the traders who aren’t out enjoying the Summer and hanging on to the market’s every move, there were a few noteworthy moves to look back on.

First, there was the flash crash in gold and silver right at the start of the week, mostly attributed to Asia’s reaction to the better-than-expected U.S. employment update last Friday. This update likely sparked speculation of U.S tapering/stronger dollar ahead, typically a bearish environment for the precious metals. When the pressure comes in a low liquidity environment., like the start of every week, markets can move fast without traders on the other side to absorb the rush of orders.

Crypto assets were a big mover this week as well to the long side, a surprising feat despite the U.S. Infrastructure Bill that threatened the crypto ecosystem with regulations that were basically impossible to comply with. We also saw the biggest hack in crypto history as the Poly Network was drained of $600M in value earlier in the week, but that didn’t seem to deter the bull run. It’s possible that traders are mainly focusing on rising value of the Ethereum network as ETH is being burned at a rapid pace since the London upgrade last week, as well as an imminent release of smart contracts on the Cardano blockchain.

In terms of the equity markets, stocks gained in value as earnings reports show strength and a recovering economy, enough to continue to attract massive amounts of capital to global equity funds. The latest U.S. inflation data was also a likely driver for higher equity prices (and positive risk sentiment) on Wednesday after a weaker-than-expected read on core CPI likely lead to some reduction of Taper bets.

And as far as the oil market, oil prices were able to make a recovery after a drop on Monday, likely on expectations that demand will continue to improve, and despite a call from U.S. President Biden to OPEC to increase oil production.

In the forex space, volatility was relatively low and choppy among most of the major currency pairs, but we did see the Swiss franc make a directional move early in the week. There doesn’t seem to be a direct catalysts for its early week weakness, but there is speculation that its recent rally may draw action from the SNB to intervene and limit the franc’s price appreciation.

In terms of winners, it looks like a toss up between the Canadian dollar and New Zealand dollar, with the former likely benefitting from the rebound in oil prices on Tuesday and the latter likely finding buyers ahead of a likely rate hike from the RBNZ next week.