Week Ahead: Trading Outlook

Key Events This Week: September 14th – 18th 

GBP: CPI – Tuesday,
USD: Retail Sales – Tuesday, CPI – Wednesday, FOMC Rate Decision – Thursday
EUR: German ZEW Survey – Tuesday
NZD: GDP – Wednesday
CHF: SNB Sight Deposit Interest Rate – Thursday
CAD: CPI -Friday

Overview

  • USD A softer week last week for the US Dollar as traders pare positions ahead of the crucial September FOMC rate decision due on Thursday. Uncertainty remains, as still the data continues to disappoint with last Friday’s University Of Michigan confidence survey printing 85 against 91 expected. The CME price only a 24% likelihood of a rate rise at this meeting. However, in support of a rise we’ve heard the Central Bank’s of both Mexico and India calling for the Fed to go ahead and raise rates now, ending the uncertainty which they feel is more damaging.
  • EUR Still operating as a function of risk appetite the single currency was stronger last week as global equity markets weakened ahead of this week’s US rate decision. The ECB’s recent policy announcement present a downside risk to any sustained EUR strength and comments from ECB’s Praet last week reiterated the Central Bank’s “willingness and ability to act”.  Uncertainty surrounding the upcoming Greek elections suggests further support for the Euro with further carry-trade unwinding.
  • GBP Short covering ahead of the August BOE meeting saw GBP sharply higher against USD last week. The meeting passed with rates left unchanged as expected, but a slightly hawkish tone was perceived as the BOE remain supportive of a 2016 rate increase. CPI data this week will be key for traders  especially following last months upside surprise and the BOE’s reaffirmed commitment to their assessment of the UK economy . GBP is still enjoying strongly trending prices against currencies fixed in easing cycles.
  • JPY The Japanese currency took a step back last week as the peak of safe-haven driven demand seems to have passed for now. Japanese PM Shinzo Abe’s return to office for another 3 years saw the Nikkei soar by over 1000 points midweek prompting further JPY weakness.
  • AUD Recovered some territory last week against broad US Dollar weakness and the prospect of Chinese stimulus. Commodity markets and disinflationary pressure stemming from the China slowdown continue to weigh. The Fed’s decision on Thursday will have a key impact on the Aussie’s trading outlook in the near term.
  • CAD Oil prices remained range-bound last week keeping the Canadian Dollar similarly hemmed in against it’s main counterparts. The BOC kept rates unchanged at this month’s meeting stating that “Movements in the Canadian dollar are helping to absorb some of the impact of lower commodity prices and are facilitating the adjustments taking place in Canada’s economy”. The Central Bank added that current risks to the inflation outlook remain within the parameters for which the currently monetary policy is appropriate.Friday’s CPI data will provide key insight into the Canadian economy and traders will be watching for signs of further damage.
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