Aussie volatile on Delta outbreak – Greenback weaker

The main story last week was the US Dollar being generally weaker against the other major and minor currencies. It was a week where bond yields were the major drivers of FX.

A week ago, the benchmark US 10-year treasury yield was at 1.46%. A robust rise in jobs created in the June US Employment report lifted the Greenback temporarily. Thursday’s release of the US Federal Reserve’s June FOMC meeting minutes which revealed that most US policymakers saw inflation risks tilted to the upside.

But at the close of New York on Friday, the 10-year US bond yield settled at 1.36%. It was no surprise then that the Dollar Index, a favoured gauge of the Dollar’s value against a basket of 6 major currencies, eased to 92.37 from 92.57 last week.

The catalyst was an unexpected rise in the latest Weekly Claims for Unemployment benefits in the US which jumped to 373,000 against median estimates of 350,000. Other data released last week also saw a cooling in activity in the US Service Sector.

Global markets also took notice of the latest surge in Delta variant of Covid-19 in Indonesia, Africa and Australia, which is unsettling.

Rate Trends Last Week

AUD/USD – The Aussie Battler staged a dramatic recovery to finish at 0.7492 in New York on Friday. It was a volatile session for the Australian Dollar, initially slumping to an overnight and December 2020 low at 0.7409, before a powerful leap to its Friday close (0.7492). The lockdown in greater Sydney due to a growing Delat outbreak and its economic implications for New South Wales and Australian weighed on the Battler.

USD/JPY – saw a dramatic slide to 109.77 overnight lows on Friday from 111.02 a week ago. At the close of trade in New York (9 am Sydney, Saturday, 10 July), the Dollar edged slightly higher to finish at 110.10. The USD/JPY pair was supported by the rebound in the US 10-year bond yield, which will continue to drive this currency pair.

EUR/USD – the shared currency traded in a stable range last week, compared to the other Major and Emerging Market currencies. The Euro traded in a 1.1807 – 1.1895 range, settling at 1.1845 which is basically in the middle. The Euro will be driven by the US Dollar in the week ahead.

GBP/USD – Sterling settled to a 1.3902 finish in New York in choppy trade. The British Pound was initially battered to an overnight and weekly low at 1.3756 before its comeback. Last Friday, Sterling hit a mid -April low at 1.3731 after the release of the US Payrolls report. UK Manufacturing and Industrial Production data released on Thursday both missed expectations. Which will keep Sterling capped.

USD/CAD – Also had a choppy session for the week. The Greenback hit a weekly and late April high at 1.2590 before slumping to its New York finish at 1.2444. Weekly low for the USD/CAD pair was 1.2303. On Friday, Canada reported that its economy created a total of 230,700 jobs in June which exceeded expectations of 172,500. In May, Canada saw 68,000 jobs lost. Quite a comeback for Canada’s currency, also known as the Loonie.

USD/CHF – This currency moved much during the past week. A souring of risk sentiment saw the US Dollar slide from 0.9207 last week to a 0.9140 New York close. Overall range for USD/CHF was between 0.9030 and 0.9275. The Swiss Franc will continue to strengthen if we see further risk-off stance in FX.

NZD/USD – The Kiwi, like its bigger risk cousin, the Aussie, slid to a weekly low at 0.6923 on Thursday before stabilising to settle at 0.7000 the following day. The weekly high for the Kiwi was at 0.7061, seen on Wednesday.

USD/SGD – the Greenback finished last week at 1.3465 Singapore Dollars. Risk-off saw USD/SGD climb to 1.3539 on Thursday which was the weekly high. On Friday, USD/SGD closed at 1.3510. The low for USD/SGD was 1.3422 which was traded mid-week.

USD/THB – Unlike the major USD currency pairs, the USD/THB has a strong finish to the week. Risk-off usually weighs on the Asian and Emerging Market FX, appealing to the Greenback’s haven status. USD/THB closed at 32.55 after hitting a weekly high of 32.73. Weekly low traded was 31.89.

USD/PHP – followed the pattern of the USD/Asian and USD/Emerging Market currency pairs. The Dollar finished the week at 50.25 from 49.30 a week ago. On Thursday, the risk-off sentiment saw USD/PHP soar to a peak at 50.51. The low for the week was at 49.05, which was traded last Friday. The Philippine Central Bank will be concerned should USD/PHP climb further to the 51.00 level and may be forced to act.

AUD/JPY – closed at 82.50 mainly on the rebound of the AUD/USD pair. The Australian Dollar was fetching 83.60 Japanese Yen a week ago. Souring risk sentiment weighed on the Aussie and favoured the Yen which saw a low of 81.32 on Friday.

EUR/JPY – drifted lower in the for most of the week and settled at 130.78 on Friday. The EUR/JPY pair hit a peak of 132.23 a week ago. The souring of risk sentiment also weighed on this cross-currency pair. EUR/JPY hit a low of 129.62 during the week. Risk sentiment will drive EUR/JPY.

EUR/GBP – closed at 0.8543 on Friday after hitting an overnight and one-week low at 0.8519. The Euro hit a peak against the British currency at 0.8618 on Thursday following the release of weaker-than-forecast UK production data.

EUR/AUD – The Euro grinded higher against the Australian Dollar on the recent concern of the rising coronavirus cases in greater Sydney. Sydney’s lockdown was extended for a week, which weighed on the Australian Dollar against other currencies. The EUR/AUD pair soared to a one-week high at 1.5978 on Thursday, settling at 1.5850 on Friday. The Covid-19 situation in Sydney will continue to drive this currency pair.

AUD/CAD – the Aussie finished the week against the Canadian Dollar at 0.9325. The overall range traded during the week was between 0.9213 and 0.9379. Canadian economic data released last week was mostly better-than-expected which kept the Canadian Dollar supported versus the Aussie.

GBP/JPY – had a choppy session for the week, trading to a low of 150.66 on Thursday in European trade following the release of weaker UK Manufacturing and Industrial Production data. Risk-off also weighed in this GBP/JPY, which favours the Japanese Yen. GBP/JPY stabilised on Friday, settling to a 153.12 finish. Weekly high traded for GBP/JPY was at 154.07, seen on Wednesday. Risk sentiment will continue to drive this currency pair in the week ahead.