FX Weekly Recap: July 24 – 28, 2023

Forex News FX

Another major central bank shifted its policy bias and spurred big moves this week!

I’m talking about the ECB and its more dovish than usual announcement. This contrasted with the Fed’s stubbornly hawkish decision, which was later on underscored by stronger than expected U.S. GDP data.

Missed the major forex headlines? Here’s what you need to know from last week’s FX action:

USD Pairs

Overlay of USD vs. Major Currencies Chart by TV

Overlay of USD vs. Major Currencies Chart by TV

Dollar pairs were off to a rangebound start, as traders were feeling the jitters ahead of the July FOMC decision.

The slow crawl lower leading up to the actual event suggested that market players were counting on a less hawkish announcement, but Fed head Powell and his fellow policymakers surprisingly kept the door open for more tightening moves.

Dollar bulls didn’t seem to buy it, though, as the U.S. currency still sold off sharply after the FOMC statement and then again during the trading sessions that followed.

The tide quickly turned, however, when the U.S. advanced GDP report was released. The numbers showed that Uncle Sam’s economic activity had been hella resilient throughout Q2, easing domestic recession fears and boosting Fed rate hike bets. This was further supported on Friday with the latest read on U.S. consumer confidence

🟢 Bullish Headline Arguments

S&P Global flash manufacturing PMI improved from 46.3 to 49.0 in July to reflect stronger pace of industry growth vs. 46.1 forecast

CB consumer confidence index jumped from an upgraded 110.1 reading to 117.0 in July, outpacing consensus at 112.1 as Americans turned more optimistic about the economy

FOMC hiked interest rates by 0.25% from 5.25% to 5.50% as expected, kept the door open for future rate hikes as Powell said they’ll go on a meeting-by-meeting basis

Initial jobless claims slowed from 228K to 221K in the week ending July 22 vs. 239K forecast

Q2 advanced GDP pointed to stronger growth of 2.4% q/q vs. estimated 1.8% GDP reading and earlier 2.0% figure, which was upgraded from the initially reported 1.1% reading

Durable goods orders surged by 4.7% m/m vs. 1.3% forecast and 1.8% previous, core durable goods orders up by 0.6% vs. projected 0.1% uptick

Pending home sales recovered by 0.3% m/m in June vs. earlier 2.5% slump (upgraded from initially reported 2.7% drop) and projected 0.5% dip

University of Michigan Consumer Sentiment Index for July: 71.6 vs. 64.4 previous

🔴 Bearish Headline Arguments

S&P Global flash services PMI dipped from 54.4 to 52.4 in July vs. 54.0 consensus to indicate a slowdown in expansion

New home sales slowed from a downgraded 715K figure to 697K in June vs. 726K forecast, marking its first decline since February

U.S. Core PCE for June: 0.2% m/m as expected vs. 0.3% m/m previous; personal income dips to 0.3% (below 0.4% m/m forecast; 0.5% m/m previous)

EUR Pairs

Overlay of EUR vs. Major Currencies Chart by TV

Overlay of EUR vs. Major Currencies Chart by TV

The shared currency kicked the week off on shaky footing when flash PMI readings from Germany and France surprised mostly to the downside, casting doubts that the ECB can maintain its hawkish bias.

A bit of consolidation ensued during the middle of the week, as euro traders looked ahead to the ECB decision and shrugged off mixed business and consumer sentiment indices.

Although the central bank still hiked rates by 0.25% as expected, the accompanying statement turned out to be quite the bombshell since Chairperson Lagarde talked about the possibility of pausing rate hikes.

🟢 Bullish Headline Arguments

German GfK consumer climate index improved from upgraded -25.2 reading to -24.4 vs. -24.8 forecast to reflect slight decline in pessimism

Spanish unemployment rate dipped from 13.3% to 11.6% vs. 13.0% forecast, as the number of employed rose by 603,900 in Q2

France’s GDP accelerated from 0.1% to 0.5% q/q in Q2 as a rebound in exports offset lower consumption and slower investment growth

Germany exits recession at 0.0% in Q2 (vs. 0.1% expected, -0.1% previous)

Germany Preliminary CPI for July: 6.2% y/y (6.1% y/y forecast; 6.4% y/y previous)

🔴 Bearish Headline Arguments

French flash manufacturing PMI slipped from 46.0 to 44.5 to signal sharper contraction vs. estimated 46.1 figure, services PMI dipped from 48.0 to 47.4 vs. 48.5 forecast in July

German flash manufacturing PMI tumbled from 40.6 to 38.8 in July to reflect faster pace of contraction vs. 40.9 consensus, services PMI down from 54.1 to 52.0 to indicate slower growth

Germany Ifo business climate index for July came in at 87.3 vs. 87.6 forecast and 88.6 previous, signaling weaker optimism

ECB raised the deposit rate to 3.75% as expected but signaled that the hiking regime may be nearing the end, with Lagarde suggesting that a hold is on the table for the next meeting

GBP Pairs

Overlay of GBP vs. Major Currencies Chart by TV

Overlay of GBP vs. Major Currencies Chart by TV

After a bit of consolidation, the pound sold off sharply on Monday upon seeing downbeat flash manufacturing and services PMI figures, which suggested that policy tightening is taking its toll on business activity.

It managed to claw back these losses throughout the week (and then some!) but resumed its sideways movement against its rivals in the absence of top-tier U.K. data.

From there, price action was mostly mixed, as the U.K. currency benefited from euro weakness while caving to yen strength towards the end of the week.

🟢 Bullish Headline Arguments

CBI industrial order expectations index climbed from -15 in June to -9 in July instead of dipping to the consensus at -17, marking its first improvement in two years

🔴 Bearish Headline Arguments

S&P Global flash manufacturing PMI for July came in at 45.0 vs. 46.5 previous, as employment rose for the fourth month in row but at a slower pace

S&P Global flash services PMI for July slipped from 53.7 to 51.5 vs. 53.1 estimate, reflecting a slower pace of industry growth

CBI realized sales index slumped from -9 in June to -25 in July vs. -9 forecast, as orders placed with suppliers declined for the second month in a row

CHF Pairs

Overlay of CHF vs. Major Currencies Chart by TV

Overlay of CHF vs. Major Currencies Chart by TV

There wasn’t much for the Swiss franc to work with in terms of economic releases this week, leaving the currency to take cues from its counterparts and overall market sentiment.

Consolidation came into play early in the week before a selloff on risk-taking followed, correlating with the positive U.S. data dump on Thursday. From there, the franc edged higher against the higher-yielding currencies and its European rivals but is still poised to end in the red against the dollar and yen.

🟢 Bullish Headline Arguments

KOF Swiss Economic Barometer for July: 92.24 vs. 90.73

🔴 Bearish Headline Arguments

Credit Suisse economic expectations index fell from -30.8 in May to -32.6 in June to reflect worsening pessimism among investors

AUD Pairs

Overlay of AUD vs. Major Currencies Chart by TV

Overlay of AUD vs. Major Currencies Chart by TV

The prospect of more stimulus from China got Aussie bulls charging around the middle of the week, as easing efforts aimed mostly at the property sector could ramp up demand for commodities.

However, the tables turned when Australia printed a downbeat CPI report that dashed hopes for future RBA rate hikes.

Aussie traders still scrambled to recoup these losses later on but struggled to hold their ground when a hawkish Fed statement brought risk-off flows back in the mix. AUD even chalked up steep losses to the dollar upon seeing upbeat U.S. GDP data and the yen on rumors of a YCC tweak.

🟢 Bullish Headline Arguments

Flash manufacturing PMI improved from 48.2 to 49.1 in July, marking its five-month high

PBOC intervened in FX market to strengthen the yuan, setting USD/CNY at 7.1406 vs. 7.2044 expected

China promised more stimulus, including rate cuts, tax cuts, debt resolution, real estate policy tweaks and fee reductions, according to state-sponsored media

🔴 Bearish Headline Arguments

Flash services PMI fell from 50.3 to 48.0 in July, capping off a three-month growth period

Australian headline CPI slowed from 1.4% q/q to 0.8% vs. 1.0% expected, annual reading down from 5.6% to 5.4% as expected

Australian import prices fell by 0.8% q/q as expected in Q2, following earlier 4.2% slump as the export price index tumbled 8.5%

CAD Pairs

Overlay of CAD vs. Major Currencies Chart by TV

Overlay of CAD vs. Major Currencies Chart by TV

It was a light week for the Loonie in terms of economic data, leaving traders to take cues from crude oil and overall market sentiment.


With that, it was no surprise that CAD pairs moved mostly sideways early in the week before risk-off flows took hold on Wednesday.

A pickup in volatility happened on Thursday, allowing the Canadian currency to rake in profits on long positions, particularly against the euro and Aussie, but it was unable to stay in the green against the yen and dollar.

🟢 Bullish Headline Arguments

Canadian PM Trudeau announced a cabinet reshuffle in order to put more focus on economic recovery

Canada GDP for May: 0.3% m/m (0.4% m/m forecast; 0.1% previous)

NZD Pairs

Overlay of NZD vs. Major Currencies Chart by TV

Overlay of NZD vs. Major Currencies Chart by TV

The coast was also clear for the Kiwi in terms of economic releases this week, which left it trailing behind its buddy, the Aussie, and moving to the tune of market sentiment.

Unlike its peers that started off with plenty of consolidation, the New Zealand dollar was off to a running start on Monday before gradually cruising higher on China’s stimulus hopes midweek.

It edged lower against the dollar leading up to the FOMC decision on Wednesday and also the yen on expectations of a YCC tweak for the BOJ statement later on.

🟢 Bullish Headline Arguments

Balance of trade for June came in at 8.8 million NZD, as exports rose to 6.3 billion NZD while imports slipped to 6.3 billion NZD 

🔴 Bearish Headline Arguments

Credit card spending rose 5.0% y/y in July, slower than 8.7% y/y forecast but stronger than 3.4% y/y previous

JPY Pairs

Overlay of JPY vs. Major Currencies Chart by TV

Overlay of JPY vs. Major Currencies Chart by TV

The Japanese currency was stuck in consolidation for majority of the week, as yen traders were likely bracing for a big announcement during the BOJ statement later on.

There were rumors of potential tweaks in the yield curve control policy, even as head honcho Ueda stressed that their current policy is appropriate for now.

Thursday saw a sharp rally for the yen across the board, as bears likely lightened up on their short positions ahead of the actual BOJ event as speculation rose of YCC tweaks, which eventually did come to pass during the BOJ statement.

Unfortunately for yen bulls, Govenor Ueda pushed back on potential rate hike speculation saying that the adjustment to yield curve control policy WAS NOT a step towards policy normalization.

🟢 Bullish Headline Arguments

Tokyo core CPI up by 3.2% y/y in July vs. 2.9% expected, 3.1% previous

BOJ kept its interest rates steady at -0.10%. It also raised the upper limits of its fixed-rate bond-buying from 0.5% to within 1.0% of the 0% target, a move seen as preparation for an exit from accommodative monetary policy.

🔴 Bearish Headline Arguments

Japanese flash manufacturing PMI fell from 48.4 to 48.1 in July to reflect sharper contraction vs. projected improvement to 50.1

BOJ core CPI ticked lower from 3.1% year-over-year to 3.0% in June as expected, indicating a dip in underlying price pressures


Japanese official noted that BOJ Governor Ueda believes long-term yields remain stable under yield curve control policy

Japan Services PPI for June: +1.2% y/y vs. +1.7% y/y in May; -0.2% m/m vs. 0.0% m/m previous

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