The Forex Week Ahead

The Forex Week Ahead: April 4th – April 8th

Sun: CNY – Leading Index
Mon: AUD – Retail Sales, JPY – Monetary Base, GBP – Construction PMI, EUR – EuroZone Unemployment Rate, USD – Durable Goods & Factory Orders
Tue: JPY – Services & Compsite PMIs, NZD – Dairy Auctions, EUR – German Factory Orders, EuroZone Retail Sales, GBP – Services & Composite PMIs, USD – Trade Balance, ISM Non-Manufacturing PMI
Wed: CNY – PMI, EUR – Germany & EuroZone Retail PMIs, USD – Crude Oil Inventories & March FOMC minutes release
Thu: JPY – Kuroda Speaks at BOJ Managers Meeting, USD – Fed Chair Yellen speaks in New York with Greenspan, Bernanke & Volcker
Fri: JPY – Trade Balance, Consumer Confidence, CHF – Unemployment rate, CPI EUR– German Trade Balance, GBP – Industrial Production, Manufacturing Production, Total Trade Balance, NIESR GDP Estimate

Overview

USD – The US Dollar continues under a raft of steady pressure following recent comments by Fed Chair Yellen which belied the more Hawkish sentiment espoused by other Fed members in recent weeks. In her speech to the Economic Club of New York, Yellen diverged from recent hawkish comments from other Fed officials, saying the Fed should proceed “cautiously” with raising rates, highlighting her concerns over prevailing headwinds from weaker global growth, low oil prices and China. The Fed Chair was also not confident that the recent spike in inflation is sustainable. This reinforced the view that the Fed rate normalization path will be very gradual, and odds are rising that we may only see just one hike this year. Traders now look ahead to the March FOMC minutes release for further colour.

EUR – With USD coming under pressure in the wake of Yellen’s Dovish commentary, the single currency has returned to an upward trajectory as the policy divergence which was starting to weigh on EURUSD dissipates alongside unwinding US rate hike expectations.  A raft of key EuroZone data leads the domestic data focus this week with attention also to turn to ECB president Draghi who attends the Portugese President’s EUR council on Thursday. Traders will be keen to see if recent EUR strength is referenced.

GBP – Brexit concerns continue to drive the action in Sterling which came under huge pressure again last week as the latest UK manufacturing survey data printed below expectations once again, highlighting the continued decline of the manufacturing industry in Britain.  News also of the potential closure of Tata steel’s operations in the UK also weighed heavy with such an event likely to deal a massive blow to the health of the UK economy. GBP closed the 1st quarter of 2016 with the biggest losing quarter (on a trade weighted basis) since 2008. Traders now turn their focus to GDP estimate, alongside Industrial & Manufacturing Production data and the remaining PMIs: Services & Composite.

JPY – JPY has been under pressure recently, driven both by huge investor outflows (with JGB selling at its largest level since 2008) and Japanese investors continuing to purchase foreign securities into the Japanese fiscal year end. Alongside the volatility in the JBG market which has fuelled investor outflows, low inflation expectations continue to weigh on the Japanese economic outlook. Traders look ahead to Trade Balance & consumer confidence data this week with attention also to be fixed on BOJ’s Kuroda who speaks on Thursday.

AUD – In the wake of a fresh unwinding of US rate-hike expectations, The Australian Dollar has once again returned to forge new highs as commodity and equity markets leap ahead on a surge in risk-sentiment.  Boosted by resilient domestic labour-market conditions and a shift into positive positioning, AUD has continued to strengthen since the turn of the year, traders will be wary though of how high AUD can go before the RBA are forced to step in on behalf of the country’s exporters who suffer during times of AUD strength.

CAD – The Canadian Dollar recovered territory over recent trading, despite further losses in Oil, as the latest data showed that Canada’s economy grew by a much larger-than-expected 0.6 percent in January, it was the fourth straight monthly gain and the biggest since July 2013. This data comes shortly after the recent BOC meeting where the central bank remained on hold and struck a surprisingly neutral tone in their economic assessment, despite the majority of forecasters taking a bearish view on CAD.