Week Ahead: Trading Outlook

Key Events This Week: September 21st – 25th 

USD: Durable Goods – Thursday
JPY: CPI – Thursday

Overview

  • USD Last week saw CPI dropping 0.1% on the month, the first decline since January prompting USD weakness ahead of the FOMC which passed, as expected, without a rate-hike. The accompanying statement and press conference delivered more of a Dovish message than markets were expecting prompting further USD weakness.
  • EUR Remains supported in the wake of broad Dollar weakness. Greek elections and ECB speeches next week should see Euro continue higher due to it’s inverse relationship with risk however, sustained strength in the aftermath of the Dovish FOMC could spur more Dovish QE talk by the ECB and traders will be wary of any further policy announcements as the ECB’s October meeting.
  • GBP Sterling strengthened over the week as UK wages were seen growing at 2.9% , the fastest rate in six years, followed by further hawkish comments from BOE Governor Carney confirming that the issue of a rate rise would come into “sharper relief at the turn of the year”. BOE’s Haldane, a well known dove, commented on Friday that should downside risks materialise the BOE should consider easing instead of tightening, spurring some GBP weakening into the close on Friday.
  • JPY Safe haven flows continue to drive JPY which strengthened on the back of the FOMC decision. Markets are increasingly expecting further BOJ easing and this week’s CPI data will be closely watched.
  • AUD The Australian currency rebounded last week fuelled by short covering into the FOMC and further USD weakness following the decision. The absence of higher US rates and the prospect of Chinese stimulus leave AUD supported in the near term with RBA Governor Stevens praising the robustness of the Australian economy in comments made last week. Risk sentiment is likely to shape the Aussie’s trading outlook this week in the absence of tier one domestic data.
  • CAD Strength in oil prices last week saw the Canadian currency supported though damage to the country’s economy from the continued oil price decline portends further BOC easing despite the BOC sounding more positive in recent communication which was also the case before the two previous rate cuts we saw this year.
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