The Forex Week Ahead: Trading Outlook

The Forex Week Ahead: Feb 15th – Feb 19th

Sun: JPY – GDP 4Q
Mon: CNY – Trade Balance, JPY – Industrial Production, EUR – ECB’s Draghi Speaks
Tue: NZD – Dairy Auctions, RBNZ Inflation Expectations (2 year), GBP – CPI, EUR – German ZEW
Wed: GBP – Unemployment Rate, Average Weekly Earnings, USD – Industrial Production, Manufacturing Production, FOMC Jan Meeting Minutes
Thu: AUD – Unemployment Rate, CNY – CPI, CHF – Trade Balance, EUR – Monetary Policy Meeting Account
Fri: GBP – Retail Sales, Public Sector Net Borrowing, USD – CPI, CAD – CPI,

Overview

  • USD Expectations of a Q1 rate-hike are even lower now following Fed Chair Yellen’s comments last week which cautioned the likelihood of global-developments (Oil, Markets, China) weighing on the US growth outlook. Data flow was mixed with a drop in consumer confidence belying better than expected Jan Retail Sales data. Key data focus this week will be CPI and the Jan FOMC meeting minutes.
  • EUR Another sharp downturn in European equity markets, alongside USD weakness, saw EUR supported last week as the single currency’s inverse correlation with risk fuelled further buying. EuroZone 4Q GDP printed in ine with expectations. As the Euro approaches 1.14 again investor expectations for ECB verbal intervention and indeed further action is growing. Traders will be paying close attention to the ECB meeting minutes.
  • GBP Sterling was flat last week, weighed upon by crumbling risk sentiment and weak domestic data yet supported by USD weakness. The latest Trade Balance data showed a narowing of the deficit in Dec though Industrial & Manufacturing Production were both below expectations in Dec. The January NIESR GDP estimate was also below expectations. A raft of key domestic data hits the tape this week. Wage growth data and CPI will be headline events.
  • JPY A sharp deterioration in risk-appetite fuelled by a further decline in equity and commodity markets saw another strong surge of JPY buying last week despite the BOJ having recently introduced negative rates. Japanese officials commented on Frday that they are watching the currency markets and will “act accordingly” as the game of chicken between speculators and the BOJ continues.
  • AUD The steady decline in equity and commodity markets over last week weighed heavily on the Aussie though further downside was tempered by USD weakness over much of the week. Continued decline in Oil prices and intensifying global-growth concerns are fuelling investor expectations for further action from the RBA. Key domestic data focus this week comes from the Unemployment rate which has been steadily decreasing recently. Traders will also be wary of risk posed by Chinese data this week with Trade Balance and CPI – any surprises here could fuel sharp volatility.
  • CAD Despite a fresh decline in Oil prices, which hit $25 per barrel last week, USDCAD remained hemmed in by an equally weak USD over much of the week. Elsewhere CAD was sharply sold as yet further Oil declines bolster investor expectations for further BOC action. Oil flows will continue to be a key driver especially with data risk from China this week. Domestic data focus is CPI on Friday.