Weekly Forex Market Recap: Oct. 11 – 15

Risk currencies dominated their safe haven counter parts this week, but bitcoin bulls were the big winners as traders priced the possibility of an ETF approval right around the corner.

Notable News & Economic Updates:

Iron ore’s 50% surge is latest spike to fuel inflation fears

BOE officials double down on signals of imminent rate hike

Coinbase is launching a marketplace for NFTs

IMF warns on inflation, says the Fed and others should be prepared to tighten policy

G20 finance chiefs back tax deal, pledge to sustain recovery, watch inflation

U.S. 2021 crude output seen falling more than previously forecast – EIA

Chinese property firms suffer fresh downgrades amid Evergrande crisis

Fed says it could begin ‘gradual tapering process’ by mid-November

Turkish lira hits record low after Erdogan sacks central bank officials

IMF panel urges central banks to closely monitor inflation, ‘act appropriately’

Oil prices scale $85/bbl on back of supply deficit

China central bank says Evergrande debt woes are manageable

Dow jumps 380 points Friday, posts winning week after strong start to earnings season

The first bitcoin futures ETF in the U.S. is set to begin trading next week

Second J&J COVID shot gets expert backing; FDA looking at lowering age for Pfizer booster

Intermarket Weekly Recap

Dollar, Gold, S&P 500, Oil, T-Bond Futures, Bitcoin Overlay 1-Hour

We saw choppy and mixed price action to start the week as traders set aside recent Chinese debt crisis and pandemic concerns, eagerly anticipating fresh inflation data and more clues on potential policy moves from central bank officials this week. So the broad market action didn’t really kick off until Wednesday, where we got another stronger-than-forecast inflation read from the U.S. and commentary from the Federal Reserve meeting minutes that a taper was likely coming before the end of the year.

Now, rising inflation and monetary policy tightening headlines have normally drawn in broad risk aversion behavior, but it looks like the different major asset classes were marching to their own beat after Wednesday’s top tier events. Gold popped higher (likely on the strong inflation data and dip in Treasury bond yields/U.S. dollar), equities started their move higher (possibly more influenced by strong earnings reports), while oil began it’s second move higher (likely on IEA’s bullish oil demand growth forecast and Saudi Arabia dismissing of calls for additional supplies).

Crypto was in its own world as well, lead higher mainly by week-long speculation of an imminent bitcoin futures ETF approval in the U.S. There’s no official approval yet announced from the SEC, but ProShares updated their prospectus for a Monday launch, indicating that they may have already gotten the green light from the SEC. We’ll just have to wait-and-see what Monday brings, but whatever the case may be, this development was enough to send bitcoin ripping higher to break the $60K handle before the weekend.

As for the forex space, the major pairs essentially traded as-if it was a pure risk-on kinda week. The comdolls dominated the safe havens, with the Kiwi & Aussie leading the way higher despite the lack of any major bullish catalysts from New Zealand and Australia.

The British pound was a strong relative performer as well, likely finding support on rising speculation that the Bank of England is ready to hike rate soon. And as usual for this type of environment, the Japanese yen and U.S. dollar were the biggest losers of the week.

It’s possible that forex traders elected to focus on improving pandemic conditions for their bullish lean, as we saw positive headlines in terms of coming booster shot and therapy approvals, rising vaccine rates, and declining death rates across the globe. It’s also arguable that the PBOC’s calming comments on the Evergande Group’s debt crisis may have been contributors to traders’ move away from safe havens as well.