The Forex Week Ahead

The Forex Week Ahead: USD Fed speak will once again factor into the picture. With the semi-annual Monetary Policy Report having already been released before then it is somewhat less likely than normal that Chair Yellen’s accompanying testimonies to both chambers of Congress on Wednesday and Thursday will carry surprises, although the opening remarks and Q&A can often be where the risk lies. Governor Brainard speaks on Tuesday about normalising central banks’ balance sheets. Regional Presidents Evans (voting), Kaplan (voting), Williams (alternate) and George (nonvoting) will also speak. The Fed releases its Beige Book of regional economic conditions and anecdotes on Wednesday. CPI will be a June update on Friday and a further decline in year-ago terms is expected. Gas prices fell 2% m/m in June and will exert some downward pressure upon headline inflation. Headline retail sales during June will be released at the same time as CPI and could come in soft. Vehicle sales fell 1% m/ m in volume terms and in dollar terms carry about a 20% weight. Gas prices fell 2% m/m with an 8% value weighting. Combined, they result in a weighted 0.35% drop in headline sales assuming flat vehicle prices and flat gasoline volumes.

EUR Europe is unlikely to matter terribly much to the global market tone over the coming week by way of fresh risks to what is presently priced in. What little is expected is of the second and third tier variety of data or of purely local market consequence. The Eurozone industrial production add-up for May arrives Wednesday, while trade figures will arrive on Friday. In both cases, individual country estimates will arrive beforehand.

GBP Can the upward trend in UK employment gains that has been in place since the end of last year be maintained in May’s reading on Wednesday? The Bank of England’s pair of quarterly surveys will be updated on Thursday including its Credit Conditions Survey and Bank Liabilities Survey. Prior Q1 editions indicated broadly unchanged supply of credit to households and corporations in Q1 but credit to households was expected to increase in Q2 through secured loans and for this to be driven by lenders’ market share objectives

JPY tumbled to a seven-week low on Friday after the Bank of Japan reiterated its pledge to keep long-term Japanese bond yields anchored near zero. The BOJ comments came in response to the recent run up in JGB yields, which followed yields in most of the industrialised world higher. The BOJ however reminded investors this week that they have no intention of letting rising bond yields potentially derail the little progress they’ve made on the economy. A light week in Japan will likely keep the yen’s direction dictated by broader moves in global financial markets. Further increases in global bond yields outside of Japan will likely keep the yen biased broadly lower.

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