Week Ahead: Trading Outlook

Key Forex Risk Events This Week: June 1st – 5th

EUR: German CPI -Monday, German Unemp Rate, EZ CPI – Tuesday, ECB Rate Decision – Wednesday, EZ GDP – Friday
USD: ISM Manufacturing – Monday, ISM Non -Manufacturing – Wednesday, Unemployment rate & Non Farm Payrolls – Friday
GBP: BoE Rate Decision , Asset Purchase target & Inflation Next 12mths – Thursday
AUD: GDP – Wednesday

  • USD A resurgence of Dollar strength last week came on the back of some recent better US data amidst light volume. The breakdown in JPY & EUR added to USD strength. However into Friday and we saw a return of negative US data with personal consumption and GDP both missing spurring profit taking on those with USD longs. With key data out this week it will be an important time for USD and will decide whether we see this USD trend strengthen with bigger volume joining in, or reverse.
  • EUR Concerns around Greece still abound and continue to create uncertainty which keeps the single currency weighed as we approach the Greek repayment deadline. Having now broken down through the pivotal 1.10-1100 area it seems a retest of the range low is in sight. With positioning light, flows are expected to be choppy heading into the US NFPs this week. ECB is expected to keep rates unchanged and traders will be keen to hear Mario Draghi’s post rate-decision comments following on from comments made by ECB’s Couere and the subsequent impact on EUR.
  • GBP Following on from the negative inflation print, we saw UK GDP come in below forecast last week and spot continue to sell off against the US Dollar. Services PMI will be key to watch this week as we saw some improvement there recently. Signs of continued wage strength should stem the GBP flow.
  • JPY The most obvious victim of this bout of Dollar strength, JPY suffered sharp losses last week. Japanese investors have been increasing foreign investment and demand for JGBs has fallen. Volatility from this lack of demand should likely see JPY lower, the risk to this is a decline in risk appetite and any negative US data
  • AUD The Australian currency took a hammering last week. Slowing Chinese growth is having a big impact on the Australian economy and there is a growing sense that RBA rate cuts are not yet priced in. Given it’s high beta status the Aussie received a double whammy from recent USD strength. Chinese Manufacturing data later tonight will set the initial tone for the Aussie’s trading outlook this week.
  • CAD A correction lower in Oil has hampered the Canadian currency and again highlights the risk to the Canadian economy from this price movement. The BoC have maintained a positive outlook recently keeping rates on hold, Friday’s Canadian GDP miss might spur speculation of a shift in sentiment, weighing on CAD.

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