Monday trading session was rather quite due to the almost empty economic calendar. Asian calendar was completely empty and the European session was determined only by German Factory orders report which was significantly lower-than-expected (-4.0% in June versus -0.3% expected). French short-term BTF Auction went without any surprises so the single currency was trading flat. The same story continued on the other side of the Atlantic as the only economic report in the U.S. was CB Employment trends index (no changes) and it was the official holiday in Canada and the financial markets were closed there.
Tuesday started with Japanese data on tap. Household spendings in Japan were flat in June on the yearly basis, while monthly growth was noticed (2.9% versus 1.7% expected). USD/JPY traded on the rangebound on Tuesday paring the initial losses and bouncing back from 111.00 support. The biggest story in Asia was the RBA meeting. Australian regulator left the rates unchanged as it has been anticipated earlier. But the statement which followed the interest rate decision gave some support for the Aussie bulls and AUD/USD managed to close the day above 0.7400 and even rose up on Wednesday. RBA was hawkish on the perspective of the Australian economy underlining the need for further tightening of the monetary policy due to the inflationary pressures and growing exports volume. German reports were mixed in the European session with much better imports and exports numbers but the Industrial production and the overall Trade Balance were rather weak for the biggest European economy in June. Anyway, the Euro bulls started to get up their heads and EUR/USD initiated 2-days bullish run breaking through 1.1600 resistance. GBP/USD buyers stepped in right after positive housing pricing data in Britain, but the gains were very limited and sterling ended up Tuesday with a slight decline, confirming unstoppable downtrend this summer. The U.S. JOLTs Jobs openings and Canadian Ivey PMI did not have a significant impact on currencies.
Japanese Yen gained strength on Wednesday trading session and USD/JPY breached 111.00 support after negative data in the Japanese financial sector. The Exports and Imports were in green in China but the overall trade balance came out weaker-than-expected in June. The financial markets players are very sensitive to any negative data recently as fears overweight the risk appetite. So the first signs of the upcoming storm were showed on Wednesday and some of the fear assets started to gain strength. European session was rather quite with no data published. The U.S. housing reports did not have any significant impact on the greenback demand and the Canadian building permits declined in June, which is not the strongest support for the BoC for hiking the interest rates. Oil inventories in the United States declined but with much more modest pace and this fact pushed the Crude Oil WTI prices down.
One of the weakest G10 currencies on Thursday was New Zealand dollar. NZD/USD fell almost 100 pips breaching the lowest prices in 2018 after RBNZ left the interest rates unchanged and published a much more dovish statement than it was expected by the majority of traders. There is no need for hiking the interest rates in the foreseeable future, so the perspectives of the commodity currency were lowered as well. European session was rather quiet and the storm started on the U.S. opening. The greenback gained strength across the board despite slower inflation data as Core CPI and PPI reports missed the expectations.
A real nightmare came on the financial markets on Friday with the worsening crisis in Turkey. It is not something new for the financial markets but the situation is getting catastrophic. The problem is that there are lots of European banks with Turkish assets on hand and if the banking system of the nearest EU neighbour and trade partner would fall, this may cause huge troubles for European banks. So the traders worldwide started to run off the toxic region heading into the greenback safety. Turkish Lira plunged 18% in one single day and EUR/USD lost more than 1% of its’ value. The U.S. administration added oil to the fire announcing new sanctions for Turkish export goods and this fact accelerated the selloff. Noone was looking at the economic calendar on Friday and the panic and fear were in focus. The U.S. Core CPI was slightly higher in June on yearly basis but the demand for the greenback across the board had a different background. There was also another surprise from the Canadian economy with strong employment report. But it seems like the impact of it will be played out a bit later when the dust will settle.