It was a week packed with key economic data from major economies, updated company earnings, and speeches from numerous central bank officials.
European and US stocks climbed to fresh record highs on Monday as investors eagerly awaited the start of earnings season. In the United Kingdom, Prime Minister Boris Johnson confirmed that “Freedom Day” would take place on Monday 19th of July. There was little action in the FX space with the dollar struggling for direction ahead of the CPI data while gold wobbled above $1800.
The main event risk for Tuesday revolved around the start of US earnings with JPMorgan and Goldman Sachs under the spotlight. Results from both banking giants exceeded expectations thanks to better-than-expected loan losses. Attention was also directed towards the latest US CPI report. Consumer prices rose by the most in 13 years in June while annual inflation saw its biggest jump since 2008. Dollar bulls were inspired by the bumper CPI print with the DXY ending Tuesday’s session on a strong note.
Mid-week the focus shifted to Jerome Powell’s semi-annual testimony in front of Congress. Investors who were hoping for Powell to dish out a hawkish surprise were left empty handed following the dovish tone seen in his prepared remarks for the House Financial Service Committee. Powell soothed market fears of early easing of monetary support by sticking with the mantra that inflation is transitory.
Back in the United Kingdom, CPI jumped to its highest level since 2018. According to the Office for National Statistics (ONS), consumer prices rose by 2.5% in June, up from 2.1% in May. Sterling appreciated as the inflation figures were seen pressuring the Bank of England to hike interest rates down the line.
Overall market sentiment turned shaky on Thursday after China reported second-quarter GDP growth that fell short of market expectations. The world's second largest economy grew by 7.9% in the second quarter of 2021 compared with the same period a year ago. This was significantly slower than the 18.3% year-on-year increase registered in the first quarter. Fears over the rapid spread of the Delta variant added to the caution, fanning fears over the global economic recovery.
We shared a technical outlook near the end of the week with G10 currencies under the spotlight. It will be interesting to see whether the GBPUSD extends losses in the week ahead and how the EURUSD behaves around the 1.1800 – 1.1770 regions.
Sentiment remained choppy on Friday as investors digested the abundance of risk event, key economic data and speeches from policymakers this week. In the commodities arena, Gold failed to conquer the 200-day Simple Moving Average this week and is descending back towards the $1800 psychological level. Bears are likely to eye $1792 and $1760 if $1800 proves to be unreliable support.
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