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The forex trading week has come and gone, so it’s time to take a look at how the major currencies performed and what drove price action. Were you able to profit from any of this week’s top movers?

Loonie strength and pound weakness were the main themes this week. But what influenced price action? And how did the other currencies fare this week? Well, read on and find out.

By the way, if you only want to find out what happened to a specific currency, then you can just skip to that currency by clicking on it below.

The Canadian Dollar

Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart
Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart

The Loonie’s price action was rather messy. Also, there were lots of diverging price action. Moreover, it looks like the Loonie was not really tracking oil prices this week. Just look at how oil’s price action played out on Wednesday and Thursday and then take a look at the Loonie’s messy price action.

As to why the Loonie had messy price action and didn’t really track oil prices that much, it’s possible that market players were wary because NAFTA renegotations started this week, although nothing really major has been hammered out by the end of the week.

Anyhow, suffice to say opposing currency price action held sway on Loonie pairs for the most part and the Loonie lucked out because some of them had negative catalysts.

However, the Loonie’s victory this week wasn’t due entirely to luck since the Loonie also got a bullish infusion on Friday before oil prices charged higher.

And that was thanks to Canada’s July CPI report. The monthly headline reading was actually flat, which is within expectations while the year-on-year reading came in at 1.2%, which is also withing expectations.

But as Forex Gump pointed out in his Event Preview, forex traders now seem to be more focused on the BOC’s three measures for the core readings and fortunately for the Loonie, two of the three measures printed an uptick, namely the weighted median CPI (+1.7% vs. +1.6% previous) and the trimmed mean CPI (+1.3% vs. +1.2% previous). The common component measure for CPI, meanwhile, held steady at 1.4%.

The Pound Sterling

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart

In last week’s recap, I noted that the pound had mixed price action, which implies that forex traders were still mulling on the longer-term implication of the latest BOE statement on the pound since the BOE tried its best to sound hawkish. Also, I mentioned that we’ll hopefully get more uniform price action from the pound this week since the U.K.’s CPI report, jobs report, and retail sales report were scheduled for released.

And, well, we got uniform price action alright since the pound got whupped across the board and ended up as this week’s worst-performing currency.

The pound initially had a mixed start, which was likely a continuation of last week’s mixed price action. However, Tuesday rolled around and the pound got sold off across the board when the U.K.’s CPI report for the July period was released since headline CPI fell by 0.1% month-on-month in July, missing expectations that it would be flat and is the first negative reading in six months to boot.

The year-on-year reading, meanwhile, came in at +2.6%, which matched the previous month’s reading but missed the consensus that it would tick higher to +2.7%.

As for the core reading, it came in at +2.4% year-on-year, which is the same annual rate of increase as in June but missed expectations for a 2.5% rise.

Given all those misses, expectations for a BOE rate hike waned, which caused the pound to tank across the board.

It should be noted, however, that the +2.6% annual headline reading is actually in-line with the BOE’s staff forecast, as laid out in the BOE’s August Inflation Report. As such, MPC members likely won’t be voting for a rate hike soon, but they also won’t be dissuaded from removing their hiking bias (for now).

Moving on, the pound temporarily jumped higher when the U.K.’s latest jobs report came in better-than-expected, with the jobless rate ticking even lower from 4.5% to 4.4% in the three months to June, which is a new record low since comparable records began in 1975. Wowzers!

Even better, the jobless rate improved even as the employment rate jumped from 74.9% to 75.1%, which is also a new record high since comparable records began in 1971.

But as noted in Wednesday’s London session recap, there were some problems with wage growth.

Sure, nominal average weekly earnings (bonuses included) surged by 2.8% year-on-year in June, which is the strongest reading in seven months.

However, the surge was due to a massive 17.2% increase in bonuses. If bonuses are stripped, then wage growth actually slowed from 2.3% to 2.1%.

Moreover, real earnings (inflation is taken into account) continue to take hits, with real average weekly earnings (bonuses excluded) falling by another 0.4%.

This marks the fifth consecutive month of declines. But on a slightly upbeat note, the large increase in bonuses does mean that if bonuses are included, then real earnings rose by 0.5% after two straight months of declines.

Anyhow, the pound initially reacted positively to the jobs report. However, there was no follow-through buying. Instead, the pound later got swamped by follow-through selling, apparently because forex traders took a closer look at wage growth and were not too impressed.

After that, price action on the pound became a mixed mess on Thursday, even though the U.K.’s retail sales report for the July period turned out to be net negative since retail sales volume did rise by 0.3% month-on-month, beating expectations for a 0.2% rise, but the previous reading was revised lower from a very solid +0.6% to a not-as-solid +0.3%.

Also, retail sales volume rose by 1.3%, which is a smaller increase compared to the +1.4% consensus and is a drastic slowdown from June’s strong 2.9% surge, which is a bad sign for consumer spending and is bad news for Q3 GDP growth to boot.

Selling pressure did resume come Friday, though. And with that final bearish kick, the pound found itself at the bottom of the forex heap this week. Not that I’m complaining or anything (Woo-hoo!).

The Australian Dollar

Overlay of AUD Pairs & Iron Ore (Black Line): 1-Hour Forex Chart
Overlay of AUD Pairs & Iron Ore (Black Line): 1-Hour Forex Chart

The Aussie had a reversal of fortune since it was the second worst-performing currency last week but ended up as this week’s second strongest currency.

And as you can see in the overlay of Aussie pairs and iron ore above, the Aussie was tracking the surge in iron prices this week. And the surge in iron ore prices, in turn, was attributed by market analysts to strong Chinese demand for high-grade iron ore.

The Aussie wasn’t tracking iron ore very closely, though. And that’s because other factors had an effect on the Aussie price action, namely the RBA minutes and risk sentiment.

Let’s start with the minutes of the August RBA meeting. To give y’all a quick rundown, the minutes reinforced the idea that the RBA is confident in Australia’s labor market and optimistic on Australia’s economic growth.

Unfortunately, the minutes also reinforced the idea that a stronger Aussie dollar would be bad for the Australian economy.

If you can still remember the August RBA statement, the RBA noted that (emphasis mine):

“The Australian dollar has appreciated recently, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”

In the minutes, the RBA reiterated that warning and noted that “the Bank’s forecasts for output growth and inflation were largely unchanged from three months” before noting that:

“[T]he forecasts were conditioned on the assumption of no change in the Australian dollar exchange rate during the forecast period, which extends to the end of 2019, and that this assumption was one source of uncertainty.”

If you put together the above statement and the RBA’s warning about the Aussie’s recent strength, then the implied message is that the RBA may be forced to downgrade its inflation and growth forecasts sooner or later if the Aussie continues to strengthen.

Also, the minutes showed that the RBA was even more concerned that “overall housing credit growth had continued to outpace the relatively slow growth in household incomes.”

Given all these negative vibes from the RBA’s meeting minutes, the Aussie halted its advance and took a dive, ignoring the risk-friendly environment and the rise in iron ore prices at the time.

Fortunately for the Aussie, risk-taking persisted and the iron ore rally accelerated, and so the Aussie was swept higher across the board.

Australia’s July jobs report was later released on Thursday. And it was somewhat negative overall. Sure, the jobless rate improved from 5.7% to 5.6%, but that’s only because June’s jobless rate was revised from 5.6% to 5.7%.

And sure, the Australian economy generated 27.9K jobs in July, which is more than the +19.8K consensus. However, 20.3K full-time jobs got axed. It just so happens that part-time jobs increased by 48.2K increased. Also, monthly hours worked for all jobs fell by 0.8% for the month.

Even so, the Aussie continued to find support, likely because forex traders were more interested in tracking the continuing rise in iron ore prices.

Aussie bulls finally lost out when Thursday’s morning London session rolled around, though, thanks to returning risk-off vibes. And risk aversion only intensified during Thursday’s U.S. session due to negative Trump-related news and the terror attack in Barcelona.

Thankfully, iron ore jumped higher again on Friday, and so the Aussie had its last hurrah before the week came to an end.

Unfortunately for the Aussie, the combination of a positive Canadian CPI report and surging oil prices meant that demand for the Loonie was just too difficult to overcome, and so AUD/CAD went its own way and the Aussie only ended up as this week’s second best-performing currency.

The Euro

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

After being a net winner for the past two week, the euro finally tasted the bitter taste of defeat this week.

And while the euro’s price action looks kinda messy at first, you get a clearer picture if we remove EUR/USD and EUR/GBP.

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

As you can see, the euro began tilting to the downside on Wednesday. Also, the euro suffered the bulk of its losses on Wednesday and Thursday. So, what happened then, you ask?

Well, as noted in Wednesday’s London session recap and as marked on the earlier chart, a Reuters report that cited two unnamed sources who were “familiar with the situation” was released during the session.

And according to this report, ECB Overlord Draghi will be speaking at the U.S. Fed’s Jackson Hole symposium next week. However, Draghi supposedly won’t be talking about the widely anticipated shift in the ECB’s monetary policy stance.

This “news” apparently convinced some monetary policy junkies to slam the “get me outta here” button as quickly as they can, assuming algos didn’t do the button-pushing for them.

After all, anticipation has been building up that ECB Overlord Draghi will deliver a hawkish message during the Jackson Hole Symposium after a July 13 Wall Street Journal article first reported that Draghi will be participating in the U.S. Fed’s Jackson Hole conference while also alleging that Draghi will supposedly use the Jackson Hole event to give “a further sign of the ECB’s growing confidence in the eurozone economy and its reduced dependence on monetary stimulus.

Aside from disappointment over the Reuters report, it’s also highly likely that market players began to preemptively position themselves ahead of the ECB minutes and with the assumption that the minutes will not be very hawkish.

As it turns out, the minutes of the July ECB meeting did have some dovish revelations.

And chief among these was the fact that concerns were expressed about the risk of the exchange rate overshooting in the future.”

Remember, ECB Overlord Draghi was asked about the euro’s strength during the July ECB presser. And back then, Draghi only had this to say:

“The repricing of the exchange rate has received some attention during the various exchanges of views, and in various ways. That’s been something that, just as I said, has received some attention.”

Compared to the tone used in the minutes, Draghi sounded more chill during the July presser while the tone used in the minutes sounded more … concerned. I’m running out of words!

In addition, the ECB also noted that “euro area HICP inflation was still subdued. Measures of underlying inflation had remained low and were yet to demonstrate convincing signs of a pick-up, as domestic cost pressures, including wage growth, remained muted.”

Moreover, the ECB was hinting at a potential switch to a hawkish bias during the July ECB statement and presser when it stated the following:

“We also were unanimous in communicating no change to the forward guidance; and also we were unanimous in setting no precise date for when to discuss changes in the future.”

“That’s exactly why we are having this discussion in autumn, and why we didn’t want to set a precise date; because we have to have all the available information at that point in time, which we’ll certainly have by then.”

“In September we’ll be having the macroeconomic projections, we’ll be having staff macroeconomic projections, so there is more information that we can look at between now and then. It’s basically the sense of the Governing Council that we will have more confidence in taking a decision with more information than we have today.”

However, the minutes revealed a more cautious side to the ECB and tried to sound more neutral:

“Caution was expressed that, in the present financial market environment, markets were particularly sensitive to incoming information.”

“[T]he Governing Council needed to gain more policy space and flexibility to adjust policy and the degree of monetary policy accommodation, if and when needed, in either direction.”

There was still this hawkish hint from the minutes, though.

A suggestion was made that some consideration be given to an incremental adjustment in the language on forward guidance, because postponing an adjustment for too long could give rise to a misalignment between the Governing Council’s communication and its assessment of the state of the economy, which could trigger more pronounced volatility in financial markets when communication eventually had to shift.”

Going back to the euro’s price action, the euro initially dove lower as a knee-jerk reaction to the not-so-hawkish ECB minutes.

However, the euro quickly recovered, which heavily implies that forex traders were indeed opening preemptive short positions on the euro ahead of the ECB minutes and then used the minutes to take profit on those shorts.

Anyhow, the euro’s price action became a mess after that.

By the way, the ECB has confirmed that Draghi will indeed be speaking at the Fed’s Jackson Hole Summit on August 25.

Who knows? Maybe ECB Overlord Draghi will talk about monetary policy, contrary to the Reuters report.

The U.S. Dollar

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

The Greenback was a net winner yet again this week. However, price action on the Greenback was not a one-way street. Also, the Greenback only barely won out against the yen and the Kiwi, so it’s not exactly a clear win.

Anyhow, the Greenback started the week on a strong note, which seems kinda weird since there were no apparent catalysts.

However, I did note during Monday’s morning London session recap that odds for a December rate hike climbed to 42% after dropping from 43.7% to 35.9% in the wake of last week’s CPI report.

There was no catalyst for the improved rate hike expectations and market analysts were silent on the issue. However, I tried to pin this on the CPI report itself.

After all, if you can still remember last week’s recap, I noted back then that despite the headline CPI only printing a 1.7% year-on-year increase, which is slower than the 1.8% consensus, it’s still faster than the previous month’s 1.6% rise and breaks four consecutive months of ever weaker annual readings. Moreover, the annual core reading maintained the 1.7% pace as expected.

Anyhow, the Greenback did get a catalyst when the U.S. session rolled around. And as noted in my U.S. session recap, that catalyst was New York Fed President Dudley’s interview with the Associated Press, wherein Dudley gave optimistic remarks, such as U.S. economic forecasts being little changed since the start of the year and that he personally thinks that inflation could still edge slightly higher, which is why he’s open to supporting another hike before the end of the year. There was the usual caveat that the economy needs to continue to evolve as expected, though.

The Greenback then broadly extended its gains on Tuesday, getting a final bullish boost when July headline retail sales rose 0.6%, which is double the projected 0.3% gain. Meanwhile, the core reading increased by 0.5%, which is more than the consensus of +0.3%.

Not only that the details of the report revealed that the improvements were broad-based across various store types and the previous readings even got upgraded to boot.

Again, this was the last bullish boost for the Greenback, very likely because forex traders were hunkering down for the FOMC minutes.

Unfortunately for the Greenback, word hit the wires that Trump disbanded his Manufacturing Council and Strategy & Policy Committee.

Here’s The Donald announcing the news himself:

This news apparently reignited concerns and flamed doubts over Trump’s growth-oriented plans, which caused the Greenback to step back a bit.

And it was just downhill for the Greenback from there since the FOMC minutes ended up being dovish as well. Forex Gump has the specifics, so read his write-up here, if you’re interested.

The short of it is that Fed officials were divided on their outlook for inflation, with “several” already beginning to think “that the risks to the inflation outlook could be tilted to the downside.”

And because of this divided outlook, some” FOMC members argued that the Fed “could afford to be patient under current circumstances in deciding when to increase the federal funds rate further and argued against additional adjustments until incoming information confirmed that the recent low readings on inflation were not likely to persist and that inflation was more clearly on a path toward the Committee’s symmetric 2 percent objective over the medium term.”

Moving on, the Greenback extended its losses before staging a broad-based recovery during Thursday’s morning London session. There were no apparent catalysts, however, so the broad-based recovery was likely just due to short-covering.

After that, the Greenback had a mixed performance before briefly resuming its broad-based slide during Friday’s Asian session and then ending with a rather mixed performance during Friday’s European and U.S. sessions.

The Swiss Franc

Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

If you didn’t skip the discussion on the euro, then you probably guessed that the Swissy fared poorly this week. And as usual, the Swissy was dancing in tandem with the euro.

However, the dance wasn’t as synchronized as before because there were instances of decoupling, as marked below.

NZD/CHF (black) vs.  EUR/NZD (inverted, red): 1-Hour Forex Chart
NZD/CHF (black) vs.  EUR/NZD (inverted, red): 1-Hour Forex Chart
GBP/CHF (black) vs.  EUR/GBP (inverted, red): 1-Hour Forex Chart
GBP/CHF (black) vs.  EUR/GBP (inverted, red): 1-Hour Forex Chart
USD/CHF (black) vs. EUR/USD (inverted, red): 1-Hour Forex Chart
USD/CHF (black) vs. EUR/USD (inverted, red): 1-Hour Forex Chart

The first instance of decoupling happened on Monday. Risk-taking was the general sentiment at the time and the safe-haven Swissy was apparently more sensitive to that, especially after last week’s strong performance.

The second instance happened during Thursday’s London session since the euro was in retreat ahead of the ECB minutes back then, but the Swissy had choppy price action.

The third instance happened during Friday’s U.S. session when the Swissy got sold off across the board while the euro had a more mixed performance. SNB meddling is a possibility, but the likely trigger for the Swissy’s broad-based selloff was the rumor that White House adviser Stephen Bannon was either quitting or getting fired.

Either way, Bannon’s rumored departure was welcomed by the market because Bannon’s nationalist and populist “America First” views were apparently despised by investors.

And these rumors apparently eased political uncertainty a bit since stocks recovered from their losses, bond yields snapped higher, and as you’ll see later when we discuss the yen, the yen also jumped higher.

By the way, the White House confirmed that Bannon was indeed leaving.  

Moving right along, as marked on the overlay of USD/CHF and EUR/USD, there was actually a final instance of decoupling on Tuesday. The euro was mixed on that day but the Swissy was clearly getting buyers, even though there were no apparent catalysts.

And as noted in Tuesday’s morning London session recap, risk-taking was the dominant sentiment at the time, so the Swissy’s strength is twice as weird. However, market analysts were just ignoring this wonky price action.

In fact, the strong demand for the Swissy on Tuesday is the starting point for euro’s loss to the Swissy, as can be seen on how EUR/CHF’s price action went down.

EUR/CHF: 1-Hour Forex Chart
EUR/CHF: 1-Hour Forex Chart

The Japanese Yen

Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart
Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart

The yen ended up having a mixed performance this week because bond yields had two-way action that allowed opposing currency price action to have a final say on the yen’s performance.

Anyhow, bond yields initially rose on Monday and Tuesday because of returning risk-on vibes due to easing worries the spat between the U.S. and North Korea, market analysts say. The yen was therefore vulnerable at the time.

Fortune finally smiled on the yen on Wednesday when bond yields plunged, according to market analysts, because of disappointing news that Trump disbanded his his Manufacturing Council and Strategy & Policy Committee, as well as lower rate hike expectations because of the FOMC minutes.

Rumors that Gary Cohn, director of the National Economic Council, will resign, as well as risk aversion because of the terror attack in Barcelona then pushed bond yields even lower on Thursday, market analysts say.

The yen was actually doing well by this time. Unfortunately, Friday came around and bond yields spiked higher when rumors came out that senior White House adviser Stephen Bannon was quitting, market analysts say. And so the yen was forced to surrender some of its gains and ended up having a mixed performance this week. Poor, poor yen.

The New Zealand Dollar

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart

The Kiwi had a mixed performance this week and looking at the range-bound and rather messy price action on the Kiwi, it’s probably safe to say that the Kiwi is in consolidation mode this week.

There was also diverging price action among Kiwi pairs. This is very clear when looking at how price action went down on Thursday and Friday. As such, the Kiwi was obviously vulnerable to opposing currency price action.

As to why the Kiwi failed to show uniform price action and strong directional movement this week, there’s no clear reason for that. It is possible, however, that market players are still mulling on what the last week’s RBNZ statement and presser mean for the Kiwi, especially since the RBNZ kept its neutral stance and still expects to hike the OCR by late 2019 but warned against the further strengthening of the Kiwi while threatening at the possibility of intervention.

Okay, here’s this week’s scorecard: