The financial markets were closed on Monday in the United Kingdom due to Summer Banking Holiday, and the trading volume was lower than usual as London is one of the three financial capitols of the world. European trading sessions started with German Business Confidence survey which showed a sudden positive spike: Business Expectations index was up to 101.2 versus 98.4 expected; Current Assessment beat the market consensus with 106.4 reading versus the forecast of 105.4 and Ifo Business Climate index has risen sharply to 103.8 versus 101.9 previously anticipated. All that positive news drove the demand for EUR/USD call options and the currency pair continued the recent recovery from the previous week’s bottom at 1.1350. Risk appetite was also fueled by the U.S. stock indices which kept the bullish run and the demand for the greenback call options was noticed lower across the board. Dallas Fed Manufacturing Business Business Index was lower in August and that also supported the bearish dollar sentiment.
Tuesday kicked off with Japanese Core CPI report which was unexpectedly high (0.5% versus 0.3% on yearly basis). The safe-haven role of the Japanese Yen was out of the attention for traders and USD/JPY together with other Yen cross rates started to climb. French Consumer Confidence was exactly with the line of expectations but the same Italian report went out in red. Although, that did not stop Euro bulls to keep controlling the market and EUR/USD call options dominated till the end of the trading day with the highest weekly price of 1.1733 as the result. European M3 Money Supply did not stop that tendency. One of the main concerns for the Federal Reserve, negative Trade Balance was enlarged in July with the final reading of -$72.20 billion. The spread was lower for more than 4 billion dollars in June (-$67.92) and most of the analysts were forecasting -$68.60 billion. The U.S. dollar was weak across the board on that news with put options evaluating for all of the major greenback currency pairs. CB Consumer Confidence was reported surprisingly strong in August (133.4 versus 126.7) but it managed to support rising stock indices but not the dollar.
Wednesday was the huge day for the overall market volatility and it started the series of three busiest days with lots of assets getting out of the usual ranges. Most of the traders were expecting the U.S. GDP report to be released on New York opening, so European reports which came out in line with the market consensus did not have any significant impact on the price action for EUR/USD. Bad news for the Australian economy came from Westpac which increased their mortgage rates by 14 basis points and AUD/USD started its three-day slide. That sudden change creates difficulties for consumer spending and the overall income could also slow down, so the RBA rate hike becomes under a huge question now. In contradiction to that, the British Pound jumped 1% versus the major currencies on positive news from the main Brexit negotiator in EU. Michel Barnier announced a deal for the United Kingdom after the country will leave the European Union in 2019. It is too early to start buying call options for GBP/USD due to the dollar strength but some crosses like GBP/AUD, GBP/NZD and GBP/EUR became attractive for the bullish reversal. The United States reported stronger-than-expected GDP growth in the second quarter (4.2% versus 4.0%) and that news was the main reversal point for the greenback this past trading week. The dollar became buoyant versus most of the major currencies except Japanese Yen and the same tendency continued till the end of the week. Another big event during the Americal trading session was the Crude Oil Inventories report which was very positive for buyers of the commodity CALL options. WTI Crude Oil approached the price of $70 per barrel and it is just the question of time for us to see fresh highs in 2018.
New Zealand dollar joined the club of the weakest currencies on Thursday on disappointing Business Confidence and housing sector data. Australian economy did not support the AUD/USD falling like a rock. Euro started to reverse on negative German Trade Balance and Unemployment figures. But the main topic on Thursday was the trade war tensions again. The Turkish turbulence also added the fuel to the fire and all of the binary options markets went back to safety on that talks. There were only two currencies which managed to hold the pressure: the Japanese Yen (safe-haven) and British Pound. Sterling continued appreciating versus commodity currencies and euro despite the slide versus the greenback. The Canadian dollar was also trying to hold the defence until the GDP report, but USD/CAD went back above 1.30 and turned into call mode as well after the Canadian Economy reported a stagnation in June on monthly basis. PCE Deflator was flat in the United States while Initial Jobless claims confirmed the robust employment of the economy operating at almost the full capacity. That also supported the greenback.
Friday was comparatively quiet and most of the assets were shifting in the same direction as two latest days. Japanese Inflation supported the Yen. Positive Manufacturing PMI in China did not help the Yuan from sliding on sanctions worries. Australian and New Zealand dollar continued the put weakness. Most of the European reports were exactly in line but CPI report fell out of that sequence. Lower-than-expected inflation might hold ECB from early rate hikes. Chicago PMI and Michigan Consumer Sentiment kept supporting the greenback on Friday.