Inflation fears and central bank moves were the top broad market drivers this week, and likely why we saw a mixed bag of moves from the major forex pairs.
But it was oil strength and improved Canadian fundamentals that drew in forex buyers to the Loonie, crushing the rest of the majors easily from basically the week open to the week close.
Notable News & Economic Updates:
China Evergrande anxiety resurfaces on Monday
Australia’s central bank holds as East Coast reopening looms
IMF says trimming global growth forecast due to rising risks
JP Morgan Global Composite PMI rose to 53 in September vs. 52.5 in August
Central Bank rate hikes this week: RBNZ raises rates for first time in seven years, signals more to come; Poland unexpectedly raises rates for first time since 2012; Iceland hikes rates third time this year to stem housing boom; Bank of Israel to end QE, open to rate rise in 2022
IMF sees inflation subsiding in 2022, supply risks may keep it elevated
Biden, Xi plan U.S.-China virtual summit before year’s end, U.S. says
Lawmakers have a deal on a short-term debt ceiling increase, Senate Majority Leader Schumer says
WTI crude hits $80 a barrel for first time since 2014
U.S. job growth slows sharply in September
World leaders reach landmark deal on a global corporate tax rate
Intermarket Weekly Recap
The main theme at the start of the week continued to be the recent focus on rising inflation risks, which continues to fuel global central bank monetary policy tightening measures and rising interest rates. And as we saw in previous weeks, inflation fears continued to have the broad effect of higher bond yields vs. lower equities and gold prices.
Inflation fears actually got an additional boost from rising oil prices, which hit multi-year highs this week after OPEC disappointed with their latest production plans on Monday. With a brewing global energy crisis, there was speculation that production could be boosted to as high as 800K barrels per day, so it makes sense the oil prices took off higher after OPEC kept their production policy to 400K barrels per day, which was originally agreed to back in July.
Bitcoin deviated from the somewhat negative global risk sentiment earlier in the week as traders priced in fresh news of adoption (e.g., US Bank launches bitcoin custody service, bitcoin set to become legal payment in Brazil) and the possibility of a bitcoin futures ETF coming soon. Bullish sentiment actually kicked into overdrive on Wednesday after SEC Chief Gensler confirmed that the U.S. will not ban cryptocurrencies, apparently reducing regulatory fears significantly from the U.S. for now.
Broad risk sentiment began to swing more positive on Wednesday, possibly on a shift in focus on U.S. Debt ceiling negotiations, which steadily improved through the week. On Thursday, U.S. lawmakers were finally able to come to agreement on a deal that would extend the debt ceiling into early December. This likely was the catalyst for equities to rebound on the session, as well as risk currencies broadly move higher against the safe havens at the end of the week.
And speaking of currencies, forex behavior was a pretty mixed bag this week as traders had to juggle between several monetary policy statements, signs of fading global economic strength, and a dip then bounce in broad risk sentiment. It was thanks to oil’s rally and very optimistic economic updates from Canada that the Loonie easily took the top spot this week against the major currencies. Meanwhile, the Japanese yen fell to the bottom ranking, with its descent against the majors picking up speed on Wednesday as risk sentiment broadly flipped positive on the improving U.S. debt ceiling situation.
USD Pairs
Fed’s Bullard: U.S. businesses having no problems raising prices
U.S. factory orders gain steam as manufacturing keeps humming
Fed’s Evans: high inflation to fall as supply bottlenecks addressed
U.S. Services Index indicates modestly faster growth In September
U.S. faces a recession if Congress doesn’t address the debt limit within 2 weeks, Yellen says
Subsiding COVID-19 infections boost U.S. private payrolls in September
Lawmakers have a deal on a short-term debt ceiling increase, Senate Majority Leader Schumer says
U.S. labor market regaining footing as weekly jobless claims fall sharply
Fed’s Mester says U.S. inflation mostly driven by pandemic-related factors
September’s jobs creation comes up short with gain of just 194,000 vs. 500,000 forecast
GBP Pairs
UK Services PMI – Prices charged inflation surges to a record high in September
U.K. inflation expectations at 13-year high lift rate-hike bets
Shortages and surging prices stunt UK construction growth: PMI
U.K. Halifax HPI up by 1.7% vs. projected 1.3% gain, fastest rise since 2007
BoE’s Pill says size and duration of inflation spike bigger than expected
EUR Pairs
Euro zone ministers expect inflation to slow in 2022
Euro area unemployment falls by 76,113 people, the largest decrease in a month of September and accumulates seven consecutive months of falls
Sentix Investor Confidence: 16.9 in October vs. 19.6 in Sept.; Loss of momentum continues
German factory orders register sharp decline in August
Energy price surge sends shivers through markets as Europe looks to Russia
German industrial production sank by 4.0% vs. projected 0.4% dip
Euro zone inflation rise may be more than ‘transitory gust’, ECB’s Schnabel says
ECB’s Villeroy sees inflation below 2% within a year
ECB’s Lagarde warns post-pandemic imbalances may curb growth
CHF Pairs
Swiss retail trade turnover rises in August
Swiss consumer prices remained stable in September
Swiss jobless rate down from 2.9% to 2.8% as expected
SNB foreign currency reserves grew from 929B CHF to 940B CHF
CAD Pairs
The total value of building permits in Canada decreased 2.1% to $9.7 billion in August.
Factors driving hot Canadian inflation still seem temporary, central bank chief says
Macklem says exiting stimulus will test global financial system
Canada’s Ivey PMI shows activity expanding at a faster pace in September
Bank of Canada sees ‘good rebound’ despite rising inflation risk
Canada posts massive jobs gain; employment back to pre-pandemic levels
NZD Pairs
New Zealand ANZ commodity prices rebounded by 1.5% after 1.6% slump
New Zealand raises rates to tame inflation with more to come
AUD Pairs
Australia’s ANZ job advertisements sank 2.8% after previous 2.7% drop
Australian retail sales fell another 1.7% as expected
Australia’s central bank holds cash rate at 0.1%
Australia’s central bank sees risks in housing market ‘exuberance’
JPY Pairs
Japan’s incoming PM Fumio Kishida to call snap election for lower house on October 31
Japan’s new ministers vow bold action for pandemic-hit economy
Japanese leading indicators down from 104.1% to 101.8%
BOJ downgrades assessment of 5 out of 9 regions in Japan
Japan’s August real wages rise for second straight month
Japan household spending falls as COVID-19 curbs sap economic recovery
