Inflation updates were the name of the game this week as hot reads from the U.S. sparked risk aversion sentiment in the markets.
The crytpo markets were especially volatile thanks to Elon Musk’s comments on Bitcoin’s use of fossil fuels, and the British pound takes the top spot among the major currencies after an early week boost from weekend election results.
Notable News & Economic Updates:
Inflation Fears Holds Risk Down
As mentioned in the intro above, the big market mover of the week was the rising inflation fears narrative, confirmed by the latest inflation data from the U.S.
This scenario has traders concerned that central banks may take away their easy money policies sooner-than-expected, despite being reminded otherwise by central bank officials through out the week.
Regardless of the calming efforts from the central banks, traders went into risk-off mode on Wednesday after the latest U.S. CPI data came in hotter than already high expectations, taking equities, crypto and oil markets lower while the U.S. dollar and other safe havens benefitted.
In the forex world, the price action among the major currencies was mostly mixed and relatively low in volatility. The British pound took the top spot after a fast bullish start on Monday in reaction to the weekend elections where pro-Scottish Independence parties took control of parliament.
The big losers of the week were the Aussie dollar and New Zealand dollars, likely victims of the risk aversion environment. And the Japanese yen wasn’t too far behind their Asia session counterparts, losing its attractiveness–even as a safe haven–as Japan’s pandemic situation worsens and as they fumble their vaccine rollout.
There major news events or economic updates from Switzerland to influence Swiss franc price action. The franc moved similarly with the euro, a pretty regular tendency given the close trade and geographic ties between Switzerland and the European Union, as well as both being viewed as “risk-off / safe haven” currencies relative to the other majors.