In the past week the Japanese yen, the New Zealand dollar, and the British pound gained the most in relation to the US dollar. The profits of these currencies against the USD reached over 1.3%. These currencies seem to gain more than the US indices, among which the Dow Jones Industrial Average is the leader this week, gaining less than 1.3%.
Knowing the decisions of the major central banks, investors in the second half of September could wait for further declarations of politicians on the COVID-19 mitigation, but on the other hand, they may wait for further restrictions. The scale of the disease increase in Europe is growing. Therefore, the risk of reintroducing restrictions is higher.
In addition, investors and markets will look forward to further macroeconomic data, and for the eurozone next week the pace of economic recovery will be the most important. The German Ifo, PMI in the eurozone, and consumer confidence in the euro area may better illustrate the economic situation in Europe. Data for August showed signs of a significant slowdown in the recent rebound, which may be a consequence of a very fast recovery in the months of reopening of the economies after lifting restrictions. The September data should provide some indication as to whether growth has slowed further or stabilized.
This, in turn, may have a significant impact on the stock market indexes, which seem to be losing momentum. Meanwhile, on the forex market, the dollar index was trading below 93 points on Friday, posting a weekly loss of about 0.5 percent. Economic data published during the week, including industrial production, retail sales, and unemployment claims, increased concerns about the US economic recovery.
It is these fears that may have a significant impact on the further direction of both stock indices and the US dollar. The situation on the gold market is also becoming more and more interesting because the price is stuck in the consolidation. Perhaps next week the market would manage to break out of this consolidation, creating a bigger trend. The USD/JPY pair may also be interesting due to breaking support this week and the lower liquidity on Monday and Tuesday due to holidays in Japan.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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