Markets Week Ahead: Dow Jones, US Dollar, NFPs, Canadian Dollar, Australian Dollar, RBA
Despite a Fed that left monetary policy unchanged, cooling sooner-than-anticipated tapering expectations, global market sentiment ended on a downbeat this past week. On Wall Street, the Dow Jones, S&P 500 and Nasdaq Composite closed -0.36%, -0.37% and -1.11% respectively. European equities were mixed. The Dax 30 closed -0.8% as the FTSE 100 netted little changed.
It was much worse in the Asia-Pacific region. A crackdown by Beijing on technology and education companies sent regional shares tumbling. The CSI 300 and Hang Send Index closed -5.46% and -4.98% respectively. Rising Covid cases, amid the emerging more contagious Delta variant, are posing a risk to global growth.
Still, the haven-linked US Dollar ended lower, likely hindered by the ongoing decline in Treasury yields after the Fed as second-quarter US GDP data missed expectations. This dynamic particularly benefitted the Swiss Franc and Japanese Yen. Meanwhile, China’s push to curb steel output to ebb pollution sent iron ore futures to a 3-month low. The Australian Dollar broadly underperformed.
There are a handful of key economic events to keep an eye out for in the week ahead. The Australian Dollar and British Pound will be eyeing the RBA and BoE respectively. Both central banks may brush aside recent inflationary pressures as temporary. The RBA could downgrade the economic outlook amid ongoing lockdowns in parts of the country.
Towards the end of the week, the United States and Canada will report jobs data for the Greenback and Loonie respectively. Economists now seem to be overestimating the health and vigor of the US economy, opening the door to disappointing data relative to expectations in the week ahead. Will this trend prevail and what are other key risks to watch for in the week ahead?
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
The US Dollar slipped last week after the Federal Reserve calmed taper timeline talks. Friday’s non-farm payrolls figure may rekindle upside USD bets if it impressive.
Tech stocks pulled back from record territory after Amazon posted tepid Q3 guidance. The pandemic winners see their growth rates normalizing in the second half of the year, limiting the upside potential for the Nasdaq 100.
Last week’s march higher in EUR/USD may well extend further after Friday’s Eurozone economic statistics that will likely turn the ECB more hawkish on monetary policy.
A strong Covid-19 vaccine program reduces risks stemming from the Delta variant. BoE optimism on economic recovery grows.
USD/MXN drops back into its recent range as investors await further guidance from economic data
The Nasdaq 100 and Russell 2000 find themselves with significantly different technical formations but traders may find cause for optimism in both indices.
Recent price action in the US Dollar Index (DXY) casts a bearish outlook for the Greenback as it extends the series of lower highs and lows from earlier this week.
Gold teased a breakout this week but bulls quickly pulled back. Is the continued tanking of treasury yields highlighting something of note?
Cable is pulling off after a strong run; near-term weakness may be the theme before trying to rally again.
USD/CAD has bounced off a key support area on Friday and could potentially charge higher in the coming week as risk-aversion over coronavirus fears has started to dominate market moves.
Australian Dollar plunged for a fifth week but held key downtrend support at the yearly lows. The levels that matter on the AUD/USD weekly technical chart into August.
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