After a lackluster week, the market has turned upbeat, with key talks and improved economic news helping end the week in good spirits.
Germany’s Angela Merkel supported ECB Draghi’s view to reduce borrowing costs and resolve Europe’s debt crisis. Meanwhile, US Federal Reserve hawkish central bankers raised expectations further of raising rates earlier than 2014. Positive US economic news also dampened expectations of further stimulus from the Fed.
US consumer sentiment reached a three-month high on early August, spurred by retail sales and low mortgage rates, University of Michigan consumer sentiment survey showed on Friday.
This US data along with the US Conference Board Leading Index capped the week in a good mood, sending stocks higher. S&P 500 stayed up for the sixth week and held at the four-year high. Europe’s leading shares reached 13-month high and extended to their longest weekly bull run in seven years.
Commodities were generally up, with gold and copper rising on upbeat US economic data and Merkel’s Europe-positive comments. Gold ended nearly unchanged while crude oil fell one percent on concerns about possible release of US strategic reserves.
Forex Markets
In the currencies front, Euro has turned higher across the board. EURUSD closed the week marginally higher at 1.2332, above the critical 1.2300 level. Next week, the market needs to gain a foothold of the 1.2400 to 1.2700 area if the bulls are serious in making an advancement. EURUSD has touched the 1.2300 area only three times in a month, while 1.2700 was last seen in late June. EURAUD closed 222 pips higher and closed at 1.1834.
USDCAD 0.9900 held for four days but finally broke on Wednesday, with price immediately dropping to its 0.9859 low, an area last visited in May. USDCAD ended the week a few pips below 0.9900. AUDUSD spent most of the week up with 162 pips, but there was a 117-pip pip dash down on Friday. GBPUSD, for its part, stayed confined in the upper part of the 1.5450 – 1.5770 range. Pound made an uncharacteristic 108 pip range throughout the week.
Meanwhile, after consolidating for 15 days, USDJPY made a rare five-day run, ending the week 141 pips to the upside, closing a few pips above 98.00 and just several pips below the week’s high. EURJPY followed the main Japanese pair’s move and soared 2 percent or 246 pips, reaching a six-week high. Dollar bullish sentiment including the brighter prospects in the European economy aided the Yen’s weakness this week.
Next Week Economic Calendar
Next week’s economic calendar is mildly busy with central bank speeches and meeting minutes from Australia, Japan, Canada, and the US evenly dispersed throughout the week. Germany’s Merkel is expected to meet French President Hollande by August 23 and Greek Prime Minister Antonis Samaras the following day. Merkel and Samaras are expected to talk about Greece and easing the country’s bailout conditions.
