The Forex Week Ahead: August 15th – August 19th
Mon: JPY – GDP
Tue: NZD – Dairy Auctions, AUD – RBA Minutes, GBP – CPI, EUR – German & EZ ZEW, USD – CPI, NZD – Unemployment Rate
Wed: GBP – Average Weekly Earnings, Unemployment Rate, USD – FOMC Minutes
Thu: AUD – Unemployment Rate, GBP – Retail Sales, EUR – EZ CPI, ECB Meeting Minutes
Fri: GBP – Public Sector Net Borrowing, CAD – CPI
USD The US Dollar softened slightly over the week driven by weak productivity numbers which printed -0.5% vs expectations of -0.4% marking the third consecutive quarterly decline, the first series of three straight declines in 37 years. The data suggests likely pressured on GDP and USD remained soft despite Hawkish comments from Fed President Williams saying a rate hike this year is still likely appropriate. Focus this week turns to CPI data for July which will give a crucial post-Brexit reading.
EUR The single currency remained buoyant over the week taking its cue from a weaker US Dollar. A raft of EuroZone data on Friday highlighted unstable conditions with German 2Q GDP printing above expectations, at 0.4% vs 0.2$ QoQ and 1.8% vs 1.4% YoY, whilst Italian GDP fell to 0% vs 0.2% QoQ and 0.7% vs 0.8YoY. EuroZone Sentix Investor Confidence for August however came in strongly at 4.2 vs 3 expected. Focus this week will be on the ECB meeting minutes with traders looking for further colour following a surprisingly neutral meeting in July.
GBP Manufacturing Production for June came in weaker than expected at -0.3% YoY vs -0.2% expected whilst Industrial Production gained slightly in June, matching expectations. Over the second quarter, total production rose by 2.1%, confirming the out-turn of the GDP report last month, marking the biggest rise since the third quarter of 1999. Production added 0.3 percentage points to total GDP growth of 0.6% in Q2. The standout data was the UK Visible Trade Balance which widened to $12.5bln in Q2 from £12bln in Q1, which could translate into weaker 2Q GDP. Alongside this, the total trade gap in May was revised significantly higher to £4.2bln from £2.2bln previous due to increased goods imports. Total Trade Balance for June widened to £5.1bln, more than double the expected £2.25bln marking a 10-month low. Focus this week will be on earnings and employment data though still not for the post-Brexit period.
JPY The Japanese Yen strengthened over the week as flows remain inbound in the wake of Brexit. Britain’s decision to leave the European Union may stymie a possible recovery in Japanese demand for steel, according to an official at the country’s top maker of the material. GDP data will be the domestic focus this week.
AUD The rally in risk assets earlier in the week drove AUD higher initially though prices fell back mid-week on weaker China data. Industrial Production data printed below expectations following on from weak Import data earlier in the week. Traders will now turn to the Unemployment rate this week.
CAD The Canadian Dollar strengthened over the week deriving support from renewed upside in Oil and and a weaker US Dollar. Domestic inflation data takes focus this week.