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FX Fundamental Breakdown - 22 Feb 2021

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Intro

We've covered what's happening for the major currencies in the coming weeks. Read on to see what we are looking for.

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Our Outlook

USD
Despite the strength of the USD early on in the week, the USD finished off the week with a large sell off. Regardless, the economic data reported last week was quite positive, including the Retail Sales data which came in at 5.3%, much higher than the expected forecast of 1.1%. In other news, President Biden has stated that he believes there will be enough Covid vaccines for most US citizens by July 2021, which in turn will benefit in recovering the economy.

Events to look out for in the coming week include the GDP Data, Fed Powell testifying, Capital Goods Orders and the Durable Goods Data all coming on Thursday (25/02).

One week forecast for the USA is bearish.

EUR
The EUR was somewhat supported last week, as most of the data reported came in better than expected. Both the GDP and the Markit PMI data were higher than forecasted, with the Markit PMI data coming in at 57.7, which was only forecasted at 54.3. During the next few months, the Covid vaccine roll out will play a vital role for the EU economy. Another factor that supported the EUR last week was the European equity market, which performed well.

One major event to look forward to in the coming week is the ECB President Legarde’s Speech on Monday (22/02) which could cause intraday volatility.

One week forecast for the EUR is bullish.

AUD
The AUD continued to appreciate in the last week, managing to close out as one of the strongest majors. Economic data from Australia during this past week was quite mixed. The Unemployment Rate Data came in at 6.4% which was better than the rate forecasted, however, the change in employment missed out by just under 11,000. Retail Sales Data also missed a great deal, coming in at 0.6% vs the 2% forecast. Regardless, the AUD remained unbothered, holding strong. Continuing to support the AUD is Australia’s strong iron ore and gold industries.

There are no major events happening in the coming week for the AUD.

One week forecast for the AUD is bullish.

GBP
With both the CPI Data (0.7% actual vs 0.5% forecast) and the Markit Services Data (47.9 actual vs 41 forecasted) reported much higher than expected, the GBP held strong again throughout the week. As the UK continues to be disadvantaged due to the pandemic, their hopes for priority access to the Covid vaccine will ensure the economies quick recovery. The Brexit calm continues to support the pound as the trade deal gives traders a good reason to be GBP positive.

Some events to look forward to next is PM Johnson’s speech on Monday (22/02), the Claimant Count Change and the ILO Unemployment rate data on Tuesday (23/02), for intraday volatility and further insight into the health of the UK economy.

One week forecast for the GBP is bullish.

JPY
Depreciating only slightly in the last week, the JPY continues to be an attractive asset currently. Coming in much better than forecasted was the GDP data, which was reported at 3% vs 2.3% forecast. Despite this, Japan is currently still struggling in dealing with the pandemic and have recently had a new Japanese covid mutation variant. Also, the BoJ currently has negative rates, which is usually a long term bearish indicator.

There are no economic events or high impact data coming from the JPY this week.

One week forecast for the JPY is bearish.

CAD
The CAD was making modest gains throughout the week, until the last few days saw oil sell offs, which put the CAD at a major disadvantage due to its dependence on the commodity. Economic data reported from Canada in the last week was also mixed. Retail Sales Data missed the forecast of -2.5% dramatically as it came in at -3.4%, however, the CPI Data was positive (1.6% actual vs 1.4% consensus).

There is one major event to watch out for in the coming week, which is the BoC Governor Macklem Speech on Wednesday (24/02).

One week forecast for the CAD is bullish.

CHF
The CHF continued to trade sideways in the last week as there were no major economic events that could have triggered a big change. The SNB continues to hold negative rates, which is a long term bearish indicator. However, an increase in rates could see the CHF become an attractive asset due to the recent positive economic data that has been reported.

An event to watch out for in the coming week is the CHF GDP data on Friday (26/02).

One week forecast for the CHF is bearish.

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