Traders balanced the really heavy economic calendar, focusing on global inflation figures and central bank rhetoric in the first half of the week, while US updates sparked rapid bouts of extreme volatility throughout.
The central bank’s rhetoric arguably topped the topics, including talk of intervention in the currency market, with the People’s Bank of China making surprise announcements while jaw dropping yen kept in check.
Subsequently, hawkish statements from a handful of central bank leaders highlighted the differences between the policy plans while also bringing some risk aversion flows into the mix.
US dollar pairs
Overlaying the US dollar against major currencies Planned by TV
Dollar pairs were in for a range-limited lazy start, downtrend before the greenback soon benefited from risk aversion and renewed hawkish hopes from the Fed.
Fed Chairman Powell has dropped hints about future rate hikes again, explaining that labor market strength indicates monetary policy may not be restrictive enough. These upbeat remarks, along with mostly upbeat middle-class data, lifted the dollar’s sentiment in the middle of the week.
The greenback rose again after the initial jobless claims report beat estimates but later returned a wide range of gains after the core PCE price index report showed a further slowdown in inflation.
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May basic durable goods orders It rebounded 0.6% m/m after a previous drop of 0.3%, with the headline reading rising 1.7% versus an estimated decline of 0.8%.
New home sales Jumped from 680K to 763K, beating consensus at 677K
Richmond manufacturing index It improved from -15 to -7 in June versus the estimated figure of -12
CB Consumer Confidence Index It jumped from 102.5 to 109.7 in June against an expected reading of 103.9, the highest level since early 2022.
Fed Chairman Powell He mentioned during the ECB forum that monetary policy may not be tight enough, with a strong labor market raising the odds of further hikes this year.
Unemployment claims rates It came in with a reading of 239K vs. 264K and 265K previously, easing fears of a slowdown in the US labor market.
Final GDP for the first quarter Revised upwards to 2% year-over-year growth from 1.2% in previous reports
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Primary US PCE in May: 3.8% YoY (3.9% YoY expected; 4.3% YoY); Personal income has grown by +0.4% m/m (+0.3% m/m expected/previous); Personal spending growth slowed to +0.1% m/m (+0.4% m/m forecast; +0.6% m/m prior)
US pending home sales in May: -2.7% m/m (forecast -0.6 m/m; -0.4% m/m previous)
euro pairs
Overlay the euro against major currencies Planned by TV
After a shaky start to the week, the shared currency posted a fairly steady rise against the rest of the currencies, especially against the commodity currencies.
However, the Euro was unable to hold on to some of its gains, giving back a good amount of its gains against the Dollar and Franc in the latter part of the week while maintaining a solid advance against the Yen and New Zealand.
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The Bundesbank expects the technical recession to end in the second quarter
During the European Central Bank Forum, President Lagarde He pointed to the effect of tightening labor markets on wage increases, which increase inflationary pressures
German consumer price index for the month of June: +6.4% yoy vs +6.1% yoy in May
The unemployment rate in the Eurozone for May 2023 6.5%, as expected
Eurozone Consumer Price Index for June: 5.5% p.a. (5.6% p.a. expected; 6.1% p.a
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German Consumer Climate Index GfK It decreased from -24.4 reading in May to -25.4 in June vs. the expected figure of -22.9
Eurozone private loans in May: 2.1% annually vs. 2.5% year-on-year; M3 broad cash pool: 1.4% yoy vs. 1.9% compared to the previous year
Eurozone Economic Sentiment Index for June: 95.3 compared to 96.4 in May
German retail sales for May: +0.4% m/m (+0.4% m/m expected; +0.7% prior)
Germany’s unemployment rate The index rose to 5.7% vs. 5.6% expected/previously
Sterling pairs
Overlay GBP against major currencies Planned by TV
Sterling had a rough Monday, taking huge losses to the dollar and franc early on. The rest of the week was mixed as the British pound rose against the commodity currencies and the yen, while giving up more ground against the rest of the currencies.
There haven’t been any reports released from the British economy in the past few days, which probably explains why the pound has simply moved as a counter currency rather than setting its own direction.
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During the European Central Bank Forum, Bank of England President Bailey He indicated noticeable signs of sustained inflation in the UK economy and that they would take all necessary steps to bring it back to target
UK house prices in June: +0.1% m/m (-0.3% m/m expected; -0.1% m/m prior)
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UK BRC Store Price Index It fell from 9.0% yoy to 8.4% in June to reflect weak inflation among retailers
UK mortgage approvals For the month of May: 50.5 thousand compared to 49 thousand previously; Net consumer credit for individuals: £1.1 billion versus £1.5 billion
UK Final GDP reading for the first quarter of 2023: 0.1% qoq as expected/previously
Swiss Franc pairs
Overlay the Swiss Franc against major currencies Planned by TV
The franc hit the floor, as it appears to still be attracting support from last week’s risk-off flows.
It was also helped by SNB President Jordan dropping his strong rhetoric over the weekend, suggesting that the central bank may continue to tighten.
After a slight decline on Tuesday, the Swiss Franc’s gains resumed in the next couple of days, particularly against the Australian and New Zealand dollars.
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during the Weekend, Jordan is the president of the Swiss National Bank He mentioned in an interview that the recent rally was “quite possibly not quite” enough to calm inflation
Swiss retail sales (seasonally adjusted real) in May: +2.1% m/m (1.2% m/m expected; -2.2% m/m)
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Leading Swiss KOF indicators: 90.8 (90.9 predicted, 91.4 previously)
AUD pairs
Overlay the Australian dollar against major currencies Planned by TV
The Australian dollar is poised to close the week net in the red as risk aversion and weak expectations for a stimulus from the People’s Bank of China (PBOC) sent the commodity currency south.
Although the Australian currency was able to benefit from China’s central bank efforts to slow the yuan’s decline, downbeat Australian CPI added more weight to the Australian dollar’s decline as it dampened expectations of RBA tightening.
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The People’s Bank of China has set a reference rate for the USD/CNY pair less than expected during their announcements on Tuesday and Thursday to slow the pace of the yuan’s decline
Chinese Premier Li Qiang She talked about that the country is still on track to achieve the 5% economic growth target in 2023
Australian retail sales It posted a 0.7% month-over-month increase in consumer spending for the month of May, after the previous flat reading
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Standard & Poor’s lowered China’s GDP forecast From 5.5% to 5.2% for the year, indicating that an uneven pace of growth can be expected
Australian Consumer Price Index for May Decreased from 6.8% to 5.6% year-on-year versus an estimated decline of 6.1%
CAD pairs
Overlaying the Canadian dollar against major currencies Planned by TV
The Canadian dollar also had a rough start, as flows moved from risk taking from the previous week into Monday trading. It managed to get some support from improving demand conditions for Crude Oil but ended up giving back some gains when the Canadian CPI failed.
Midweek trading was a mess, with the Canadian dollar advancing against its US dollar rivals while losing against the euro, dollar and franc. The broad trend returned on Friday, once again to the downside for the Canadian dollar as traders expected a weak monthly GDP reading.
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Crude oil It opened a little higher after the failed coup attempt in Moscow, as rebel Wagner convoys returned to bases and charges against Prigozhin were dropped.
Crude oil inventories in the US Energy Information Administration It showed a withdrawal of 9.6 million barrels, compared to the estimated reduction of 1.4 million barrels, and the previous withdrawal of 3.8 million barrels.
Bank of Canada Business Outlook Survey – Q2 2023: Although far from normal, the BoC says both consumers and businesses expect improvements in inflationary conditions and demand for goods and services.
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Canadian address has CPI It came in line with the consensus at 3.4% y/y from a previous reading of 4.4%, the lowest level since June 2021.
Canadian GDP for April 2023: 0.0% m/m (0.2% m/m forecast, 0.1% m/m previous)
NZD Pairs
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The New Zealander actually had a positive start to the week before all hell broke loose on Wednesday.
Other than risk aversion stemming from expectations of rising global borrowing costs, there was no clear catalyst for the sharp sell-off.
After stabilizing on Wednesday and Thursday, possibly aided by improved New Zealand Business Confidence Survey data and a slight positive shift in risk sentiment, the New Zealand dollar managed to claw back some of its losses, and managed to see green by Friday’s close against a few of the majors.
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ANZ New Zealand Business Confidence Index It improved from -31.1 to -18.0 in June, reflecting weakening pessimism
Japanese yen pairs
Overlaying the Japanese Yen against major currencies Planned by TV
It appears that the yen has been pulled in opposite directions by risk aversion flows and yen threats.
Early in the week, a summary of the Bank of Japan’s views revealed that the policy maker called for an early review of the YCC. The report also showed that committee members recognized the chance of inflation moderating soon.
However, rumors that the Bank of Japan may step in to intervene in the FX market once USD/JPY reaches the 145-150 range kept yen traders on edge for the rest of the week.
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Bank of Japan core consumer price index It rose from 3.0% yoy to 3.1% as expected, marking its fourth consecutive monthly gain.
Japanese Deputy Finance Minister Kanda They say they watch FX movements closely with a great sense of urgency
Japanese housing begins for the month of May: +3.5% yoy (-2.0% yoy forecast; -11.9% yoy)
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During the European Central Bank Forum, Bank of Japan Governor Ueda They reiterated their plans to keep monetary policy unchanged while policymakers monitor the impact of higher interest rates on economic activity