The Forex Week Ahead: Trading Outlook

The Forex Week Ahead: February 29th – March 4th

Mon: GBP = Net Consumer Credit, Mortgage Approvals, EUR – EuroZone CPI, CAD – Current Account, JPY – Jobless Rate & Capital Spending
Tue: NZD – Dairy Auctions, CNY – PMIs, AUD – RBA Rate Decision, EUR – German Unemployment Rate, CAD – GDP, USD – ISM Manufacturing
Wed: AUD – GDP, CHF – GDP, GBP – PMIs, USD – Crude Oil Inventories, Fed Beige Book,
Thu: CNY – PMIs, JPY – PMIs, GBP – PMIs, USD – ISM Non-Manufacturing
Fri: USD – Unemployment Rate, Non-Farm Payrolls, Average Weekly Earnings, Trade Balance

Overview

  • USD Shrugging off the Dovish tone of the January FOMC meeting minutes, the US Dollar is being supported by a spate of positive data with Core inflation rising at its fastest pace in over four years and 4Q 2015 GDP unexpectedly jumping 1%. Personal Consumption Expenditure data however, which the Fed use as a key gauge for inflation, was weaker than expected, keeping expectations mixed ahead of the March FOMC. Bulls will be focusing on this week’s Unemployment Rate & Non-Farm Payrolls data for further support following last month’s unexpectedly low number.
  • EUR A recovery in equity markets over the week weighed on EUR which also came under pressure from a stronger US Dollar. A raft of weak EuroZone PMIs keeps expectations for further ECB easing supported ahead of their upcoming meeting. Key domestic data focus this week will be on Eurozone CPI.
  • GBP Brexit concerns weighed heavily on Sterling over the week as Bank reports forecasted the likely damage to the UK economy from a “Brexit”, further fuelling investor uncertainty. 4Q GDP on Thursday managed to stem the losses with data printing in line with expectations. A raft of domestic PMI data sets as well as credit and mortgage data will be domestic focus this week.
  • JPY A recovery in risk-sentiment over the week, supported by strength in Oil and equity markets, saw the Japanese Yen weaken as safe-haven demand softened. Moves were further by comments from BOJ Governor Kuroda informing markets that there is scope for pushing Japanese rates deeper into negative territory. Key China data over the week could see JPY safe-haven demand kick in again if data is weak.
  • AUD The Australian Dollar continued to strengthen over the week, supported by a more accommodative risk-appetite across markets, with sentiment buoyed by the moves in Oil. This strength was further compounded by unexpected strength in domestic 4Q Private Capital Expenditure which printed 0.8% against an expected -3%. RBA is not expected to cut rates further at this meeting though traders will be keen to hear the RBA’s latest economic assessment.
  • CAD Recent Oil strength has benefitted the Canadian Dollar greatly. News of a Saudi Arabia & Russia led deal to freeze output at current levels received backing from other Oil-producers, and though countered by news of record builds in US Crude Oil inventories, keeps hopes alive for a correction to the current over-supply in Oil markets. Oil strengthened further into the weekend driven by a technical rally as traders squared Brent positions ahead of next week’s expiry. US Crude Oil inventories will be eyed again this week having weighed on price the last two week’s