The Forex Week Ahead 7th – 11th August
The Forex Week Ahead: USD USD Index, which fell to a new 15-month low earlier in the week, jumped to a one-week high on Friday after the Bureau of Labour Statistics reported the U.S. economy added 209,000 new jobs in the month of July. The dollar’s across-the-board jump in the wake of Friday’s solid U.S. economic figures was welcomed by dollar bulls, who have been on the defensive for much of 2017. Strong US economic data should keep alive hopes for one more Fed lending rate hike toward the end of this year. However, the extent to which the good data can offset or overshadow disappointing U.S. political headlines and ultimately encourage investors to scale back bets against the dollar remains to be seen. A light economic calendar week will be headlined by CPI consumer inflation data on Friday. The market’s focus on price pressures will likely make this week’s CPI data a significant market mover. Any signs that inflation pressures are building would likely add to the dollar’s resurgent tone from the previous week.
EUR soared to a two and a half-year high around the middle of the week as even solid U.S. economic data did little to offset the broadly negative sentiment surrounding the dollar. Solid U.S. payrolls figures late in the week helped the greenback recover to a one-week high. German trade figure will top an otherwise quiet week of economic data in the 19-member bloc this week. The single currency could be vulnerable to continued selling as traders unwind short-USD dollar positions following last week’s solid U.S. payrolls.
GBP dropped from an 11-month peak versus the dollar and hit its lowest level in nine-months versus the euro after the Bank of England expectedly left its key lending rate unchanged on Thursday but lowered its outlook for U.K. growth and inflation in the coming years. The downgraded forecasts caught many investors offside after recent commentary from BOE officials suggested the bank was considering lifting U.K. borrowing costs in the months ahead. Following the busy U.K. data calendar last week, traders will have a bit of a break to digest the BOE’s more dovish than expected monetary policy statement. . June IP should print largely unchanged from previous months, growing at 0.1% MoM (Thursday; consensus: 0.1% MoM; previous: – 0.1% MoM). The trade balance will likely improve only marginally, to £-2.9bn, as exports continue to be supported by a weaker GBP (Thursday; previous: £-3.1bn).
JPY A very light Japanese economic calendar will likely leave the yen’s direction driven by developments in external markets. Yields in the U.S. and more broadly, sentiment in global financial market will likely dictate the yen’s direction. June machinery orders data (consensus: 3.7%, May: -3.6%) and the July corporate goods price index consensus: 2.3%, June: 2.1% (both Thursday) will be watched but unlikely to be drivers.