The Forex Week Ahead 14th – 18th August
The Forex Week Ahead USD Wednesday’s minutes to the July 26th FOMC meeting will be parsed for a further indication of exactly how to interpret the words “relatively soon” that were codified in the statement in reference to when to expect the implementation of plans to begin reducing bond reinvestment flows. The conditionality around such guidance may be expanded upon beyond the statement’s “provided that the economy evolves broadly as anticipated” guidance. Retail sales (Tuesday) are expected to post firmer growth in a rebound from the June numbers. Industrial sector data will include the Philly Fed gauge on Thursday, industrial output in July again on Thursday and the Empire manufacturing gauge on Tuesday. Housing starts will struggle to keep up the momentum set by an 8.3% MoM rise in June when July figures arrive on Wednesday. The University of Michigan’s consumer sentiment reading for August closes out the week’s hits and the issue here is whether the two-month decline in expectations continues.
EUR Germany’s economy probably clocked another impressive quarter in Q2. GDP growth at a similar pace to the 0.6% QoQ non-annualized but seasonally adjusted gain in Q1 is a reasonable expectation. So is a cooling trend that sets in following what may be a near-term peak in growth rates if recently softening survey indicators continue to wane. Recall that the composite purchasing managers’ index has fallen by 2.7 points to a still-robust 54.7 reading in July. The ZEW investor expectations gauge has slipped by about 3 points over the same period of the past couple of months but the IFO business expectations measure has continued to climb to the highest level since early 2014. Other updates will include Eurozone CPI revisions for July on Thursday, the Eurozone add-up for industrial production on Monday and the Eurozone Q2 GDP revision on Wednesday that incorporates the German (Tuesday) and Italian (Wednesday) figures.
GBP After slipping a touch in the June report, UK CPI and core CPI are expected to resume an upward drift to gently higher readings in next Tuesday’s prints for the month of July. The ongoing lagged effects of currency pass-through have been raising imported inflation. Since the Brexit vote outcome in June of last year, pound sterling has depreciated by almost 13% versus the dollar and almost 16% versus the euro. Consensus expects CPI to crest at around 3% by year-end before the pressure begins to dial back over 2018.UK retail sales volumes (Thursday) for the same month of July are expected to face downside risk in the wake of the solid gain in June and a flat print seems plausible. That would continue the oscillating pattern of sizeable gains followed by sizeable losses that has been in place for most of this year.
JPY Q2 GDP and July’s trade balance will top Japan’s economic calendar, the one to watch will be an expected acceleration of Japanese growth that is expected to be double that of the 0.3% QoQ pace in Q1 and fed by accelerated consumption and investment growth, but the yen’s direction could continue to be driven by the overall mood on global financial markets, and any continued flight to safety due to mounting tensions between the U.S. and North Korea.