Weekly Market Update (02 August 2021) – Powell downplayed Delta variant’s impact on U.S. economic recovery

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ByLCMS Traders FX Analysis Team

 AUG 2, 2021

(1) The U.S. FOMC kept its monetary policy unchanged last week during their monetary policy meeting as widely expected. The central bank expressed optimism in the U.S. economic recovery, highlighting that the U.S. economic indicators have continued to strengthen. However, Chairman Jerome Powell highlighted that the economy is still a distance away from full recovery. Powell also downplayed the impact that the COVID Delta variant will have on the U.S. economic recovery.

(2) The U.S. advance GDP q/q data released last week was way below the market’s forecast. The U.S. economy grew by 6.5% during quarter two of 2021, slightly higher than the growth recorded for quarter one but fell short of the forecast of 8.5% due to shortages of labour and supply chain issues.

(3) The Canadian CPI data released last Wednesday indicated a slowdown in inflation in June from May. Monthly inflation rose by 0.3% from a 0.5% increase in May while year-over-year headline inflation rose by 3.1% from the previous 3.6%. The slowdown in inflation was due to base-year effects which had a downward pressure on the rise in prices.