IFX Market Report: Wednesday 18th August 2021

As market sentiment continued to sour, the Dollar was able to notch its second straight day of gains on Tuesday, “bolstered by safe-haven demand, as investors fretted about Afghanistan, a slowing Chinese economy, and the rapid spread of the Delta coronavirus variant which forced some lockdowns”. US Retail Sales at first curbed gains in the Dollar but “that was offset by the higher-than-forecast rise in industrial production, which accelerated the Greenback's gains”. Retail Sales for July was forecasted at -0.3 but came in at a disappointing -1.1%. Industrial Production on the other hand, printed an actual figure of 0.9%, 0.4% over expectations. Reuters this morning have pointed out that a poor Retail Sales report, combined with “evidence of a slowdown in the Chinese economy and ongoing political turmoil in Afghanistan, is driving investors to pay off dollar-funded borrowing positions and pull money out of high-risk markets”. The Afghan Taliban said yesterday in their first official news briefing, that they intend to proceed with “friendly relations” with the outside world, and “would respect the rights of women within the framework of Islamic law”. From the market’s reaction, it’s safe to say many investors “were not comforted by the Taliban’s conciliatory tone”. In the afternoon, the US Dollar Index rose by 0.6% to 93.119 and the Euro, the biggest component in the Dollar Index, fell 0.6% to 1.1709.

The New Zealand Dollar yesterday traded at its lowest in three weeks after the country identified its first COVID-19 case since February. Prime Minister Jacinda Ardern said that her government “have planned for this eventuality”, as she announced a snap lockdown at “level 4”. Under these restrictions only essential services will remain open – schools, offices and all businesses will be closed.

GBPUSD experienced significant losses on Tuesday. After opening at 1.3825 the rate quickly dipped below that mark as market sentiment became increasingly ‘risk-on’. After shedding almost a cent, GBPUSD finished the day at 1.3737.

GBPEUR also made a loss on Tuesday but not as devastating. The pair opened the session at 1.1746 and closed at 1.1725.

EURUSD made further losses on Tuesday as the Dollar’s demand picked up. The pair opened the day at 1.1770 and closed at 1.1716.

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