Market Overview

A set of predominantly positive macro statistics from the United States on Thursday lessened the market's demand for safe-haven assets keeping the mid-term sentiment for a relatively weak Greenback vs the world currency basket going. 

The U.S. initial jobless claims fell to 850,000 after 893,000 last week on the background of a four-week average for jobless claims at 912,000. The initial claims reading exceeded 1.1 million just at the end of August. Continuing jobless claims declined up to 12.628 million after more than 13.5 million just a week before and 14.5 million during the last part of August. 

Philadelphia Fed Business Conditions improved up to 56.6 points in September vs 38.8 points in August, as the capital expenditure (CAPEX) index soared to 31 points from just 23 points a month before, and that was the best value since February. Philadelphia Fed Business Conditions improved by 56.6 points in September vs 38.8 points in August, as the capital expenditure (CAPEX) index soared to 31 points from just 23 points a month before, which was the best value since February. The Philly Fed New Orders indicator gapped to 25.5, a number that was only exceeded on two occasions over the last two years. 

The only "weakness", that could be called a "weakness" in formal terms, came from the housing starts indicator that declined by 5.1% month-to-month, but it happened after the strongest readings of 17.5% growth in July plus 17.9% growth in August. A rise in the housing sector very rarely occurs at such a pace for several months in a row. The absolute number of 1.416 million of new housing  is higher than it has been for any month for the period of 2015-2019. 

The more new data coming from the U.S. that suggests that the recovery pace in Q3 will be more rapid, the less reason the investment community will probably have to hold money in the low-income U.S. Treasury bonds, and for protection. In this scenario the U.S. Dollar exchange rate may probably suffer, which is even better for the U.S. trading balance with China and other countries. The Chinese Yuan returned to its peak values over the previous 15 months, with USD/CNY building a nest at the 6.75 twig, as the New Zealand flightless "kiwi bird" soared again to its fresh record since July. NZD/USD touched the 0.68 area today following the national upbeat gross domestic product (GDP) data released the day before. 

NZD takes the bids for the fifth day in a row, as Grant Robertson, New Zealand’s finance minister, remarked that the New Zealand economy is rebounding from the recession, as well as, “will improve further by early 2021”, but ruled out any interest rate change by the Reserve Bank of the country at least until that time. Its Australian "roommate" has so far withstood the severe test during September's technical correction in global stock markets, so AUD/USD has not inched more than ten points below the 0.72 level, and now lapsed into its old ways above 0.73. Unemployment in Australia declined to 6.8% from 7.5% a month before, according to the latest release on Thursday morning, as the economy added 111,000 of jobs in August after 114,700 jobs in July. 

At the same time, the technical range for the single European currency is still intact since the beginning of August, with a main support near 1.17 and a psychological resistance at 1.20. Perhaps the Euro has a slightly bullish sentiment too after an upside reversal daily candle on Thursday, which has appeared on the technical charts as EUR/USD quickly rebounded off 1.1735 intraday low. 

Even the Sterling was bought at 1.2865-1.2885 levels, so that GBP/USD jumped to almost 1.30 immediately after the Financial Times reported that Ursula Von der Leyen, the head of the European Commission, just mentioned she was "convinced" a trade deal with the U.K. was "still possible". This happened just one hour after the British Pound lost around one cent reflecting the Bank of England's (BoE) message. The U.K. regulator remarked it was not ruling out the very possibility of negative interest rates on the table amid a spike of coronavirus cases, also citing a higher unemployment rate and a possible new Brexit uncertainties. However, so far, the currency markets have not given preference to the U.S. currency even in this pair. 

The U.S. Dollar also continues to decline against the South African Rand, as USD/ZAR easily slipped down under the key support level of summer around 16.33 on Wednesday and fell to 16.10 during Friday's European morning. Even though the interest rate in the South Africa Republic is now at 3.5% only, instead of 6.25% where it stood at the beginning of 2020, different emerging market assets retain some of their attractiveness, especially after the U.S. Federal reserve (Fed) reassured markets that it would keep the Fed fund rate near at the current almost zero level at least through 2023. Only one member of the Fed's monetary committee, out of sixteen members, sees the possibility of raising the interest rate at least once in 2022, and only four members theoretically predict such a possibility in 2023. 

Of course, after the "money printer" clear hints at Jackson Hole symposium in August by the Fed's Chairman Jerome Powell, no one really expected anything else from Fed projections now. Therefore, the "money printer", the inflating balance of the Federal Reserve, and zero rates for many years are already in the price of both the Dollar and stock market assets. This means, the market should not exclude the chances of a short-living strengthening correction for the U.S. Dollar in the foreign exchange market, due to the next take profit waves, or even a certain period of temporary strength for the U.S currency before the presidential election because of safe-haven buying. So, the concept of U.S. Dollar weakness is probably more of a medium-term perspective than a short-term factor.

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