Market Minutes Overview:
- A look across the majors sees many USD-pairs trading within +/-0.1% of their daily open; much ado about nothing.
- Aside from the GBP-crosses which are marginally weaker on the session, the major US economic data release did little to move markets.
- Fed speakers remain the dominant market force, more so than any data release due through the end of the week.
All Quiet on the Western Front
FX markets are more or less in a holding pattern despite several significant data releases coming down the pipeline. A look across the majors sees many USD-pairs trading within +/-0.1% of their daily open; much ado about nothing.
The Bank of England’s June policy meeting produced a disappointing reaction in the British Pound, which my colleague Justin McQueen aptly attributed to a ‘longshot bias,’ insofar as traders were expecting a far more hawkish outcome than what actually transpired. The Shadow MPC predicted another reduction in QE, but the actual MPC came in 1 for 9 in terms of that vote.
Video Technical Notes: GBP/USD
- Last week, GBP/USD rates dropped out of a sideways range that encompassed price action for a month, but the losses have not been extreme: the broader sideways range in place since early-February, between 1.3660 and 1.4250, continues to encompass price action. Momentum has turned bearish, however. The daily EMA envelope has become resistance, in particular the daily 5-EMA. Daily MACD is descending while in bearish territory, while daily Slow Stochastics have turned lower below their signal line. A deeper setback towards range support around 1.3700 may be in the cards.
Aside from the GBP-crosses which are marginally weaker on the session, the major US economic data release did little to move markets. The May US durable goods orders report came in slightly weaker than anticipated at +2.3% versus +2.8% expected (m/m).
Durable goods are items with lifespans of three-years or longer – from refrigerators and washing machines to cars and airplanes. These items typically require greater capital investment or financing to secure, meaning that traders can use the report as a proxy for business’ and consumers’ financial confidence and health.
Atlanta Fed GDPNow 2Q’21 Growth Tracker (June 24, 2021) (Chart 1)
Unfortunately, the weaker May US durable goods orders report led to a reduction in growth expectations immediately thereafter (notably, longer-term US Treasury yields have come down on the day).
Based on the data received thus far about 2Q’21, the Atlanta Fed GDPNow growth forecast has been slightly downgraded from +10.3% to +9.7% annualized. “The nowcast of second-quarter real gross private domestic investment growth decreased from 16.6% to 13.1%, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth decreased from -1.10% to -1.06%.”
The next update to the 2Q’21 Atlanta Fed GDPNow growth forecast is tomorrow, June 25, after the US personal income data.
Quiet but Busy
Yesterday I said that “it appears that markets are poised to remain quiet. None of the high rated events seem to stand out in context of the onslaught of Federal Reserve speakers, who have been hammering markets with commentary this week to control the narrative. It remains the case that with each passing Fed speaker over the next few days, those remarks will carry more import than any day to release through the end of the week.” This remains true, and won’t change before the week is over.
DailyFX Economic Calendar, ‘High’ Rate Events, Next 48-hours (Table 1)
--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
