FX Market View #4

The equity markets traded firmer as the weekend approached, however this was a continuation of gains and losses alternating between days. As for the US Dollar, it could not hold onto a stretch of positive returns against most major currencies aside from the Yen and Swiss Franc. Market trends are also absent in some commodities with gold being held in the lower trading range. Volatility in oil trading has gradually descended to more regular levels. A probable outcome of the market adjusting to be likelihood of continued delays in container shipping through the Suez Canal.

Dollar bulls have been setting the tone since the start of the year. Highs have been reached by the greenback against the Euro, Yen, Yuan, and Swiss Franc to name just the majors. This year the Dollar also outperformed the Swedish Krona as well as the Australian and New Zealand Dollar. Apart for short periods of profit taking the strengthening theme behind the Dollar remains intact. There are however, two economic highlights next week that could knock the Dollar off course slightly. Firstly, the proposed US infrastructure relief package which might exceed 3 trillion dollars. And secondly a strong jobs report number being released on Friday.

The week ahead will have the release of more key data. German unemployment numbers will be released on Wednesday, as well as the CPI data of the Eurozone. There is a growing risk that this data will lean towards the evidence of a slowdown in European economic activity. Any gains that the Eurozone has managed to achieve in the bloc economies have already been seriously undermined by the impact of the third wave of coronavirus. In the US the inoculations are progressing ahead of schedule, and combined with a substantial fiscal and monetary stimulus their growth targets puts them above other major economies.

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