Since the beginning of 2020, and throughout the pandemic, the dollar has remained under pressure. The Greenback as a basket of currencies has been unable to gain traction. Most of the losses are likely due to the decline in interest rates and the Fed’s easy monetary policy. Few central banks are in the process of purchasing assets at the pace of the Federal Reserve. There have been fits and starts in the United States as the Delta variant of COVID-19 spreads across the United States. Economic data outside the United States has been mixed, with China gaining traction and Europe easing. This rebound since the beginning of the pandemic in economic activity has kept forex trading rangebound.
The Delta Variant is a Real Problem
The fear of the spread of the delta variant of the covid-19 virus is no joke. Cities across the United States are preparing for outbreaks that are already underway. Most of the spread of the variant is in the South, especially Florida, but areas with congested activities are ready for battle. On Thursday, August 3rd, New York City Mayor Bill de Blasio announced that New York City restaurants and gyms would require proof of vaccination for entry. New York City has decided that it will become the first U.S. city to require evidence of at least one dose of a coronavirus vaccine for various activities. The new mandate is for workers and customers and will likely put pressure on people to get vaccinated. The move will initially cause a slowdown in activity if New York City cannot get the spread of the variant under control before the autumn. During the summer, many of the homeowners leave the city for a holiday. The spread of the variant has weighed on the U.S. 10-year treasury bond, pushing the yield below 1.2%, and weighing on the U.S. dollar.
Employment Data is Still Soft
The spread of the variant is weighing on economic data in the United States. During the first week of August, ADP released is private payroll report ahead of the U.S. Jobs report. According to ADP, employers increased the number of jobs by 330,000 positions for the month, a decline from the 680,000 in June and well below the estimate that jobs data would increase by 653,000 in July. June’s final total was revised lower.
Mixed International Data
There has been a string of mixed international data worldwide. China’s Caixin service PMI came out more robust than anticipated, increasing to 54.9 from 50.3 in June. This services component increased the composite purchasing managers index to 53.1 from 50.6. China is also experiencing a broad outbreak of variants, and lockdowns are likely to hamper economic growth. Sources say that 50% of the 32 provinces report cases, and domestic travel in China is discouraged.
PMI data in Europe was mixed, with the Eurozone releasing stronger than expected data and the U.K. releasing weaker than expected information. The eurozone service PMI for July was weaker than expected, with the full benefits PMI coming out at 59.8, more vulnerable than the preliminary estimate of 60.4. Additionally, the Eurozone said sales increased by 1.5%, lower than anticipated, and the prior month’s number was revised lower. The weaker than expected results caused newly generated headwinds in forex trading for the Euro. The U.K.’s purchasing managers’ data was more substantial than expected. The service PMI increased to 59.6 while the composite PMI remained near 59.2, better than the 57.7 estimates.
The Bottom Line
Data has been a critical factor in online forex trading since the beginning of the pandemic. Traders seem to be having a difficult time identifying a trend. Each time it appears that a country is out of the woods, the spread of a variant of the COVID-19 virus creates havoc and weighs on the currency. Yields in the U.S. are hovering close to their pandemic lows and have difficulty gaining traction. Forex trading has been rangebound for most major currencies.
The spread of the delta variant has led NYC to decide to require a vaccine to enter indoor restaurants, gyms, and events. This move could further weigh on economic activity. The private July employment data released in early August was less than stellar and could likely weigh on U.S. yields. Employment data has been one of the standouts in the United States, but the rebound is now being called into question.
Forex trading has also been volatile, given the mixed data experienced across the globe. Chinese PMI data was stronger than expected, while European data has been weaker. China is also experiencing a breakout in the delta variant, which could also weigh on economic output. The continued spread of the variants is a key reason why there have been few trends in forex trading, making most currencies pairs a rangebound process.