The Forex Week Ahead

The Forex Week Ahead: September 19th – 23rd

Mon: NZD – Consumer Confidence
Tue: NZD – Dairy Auctions, AUD – RBA Sept Meeting Minutes, CHF – Trade Balance
Wed: BOJ – MPM, GBP – Public Sector Net Borrowing
Thu: EUR – ECB Economic Bulletin, EZ Consumer Confidence, USD – House Price Index, Existing Home Sales
Fri: EUR – EZ PMIs, CAD – CPI, USD – Manufacturing PMI

Overview

USD The US Dollar continued higher this week despite Dovish comments from Fed’s Brainard who urged caution ahead of the FOMC next week. The latest inflation data for August provided further support with the headline reading printing 1.1% against 1% expected and core printing 2.3% against 2.2% expected. This data has further increased traders’ expectations that the Fed is on track to raise rates this year and markets are expecting a Hawkish tone to the FOMC meeting this week.

EUR Eurozone showed stalling growth in July. Industrial production fell 1.10% since June, reversing the upwardly revised 0.8% growth in the previous month. Output contracted in Germany (-1.90%), and France (-0.60%), undermined by weakness in global demand. Lautenschläger, member of the ECB’s Executive Board, stated that the central bank should not pass fresh stimulus measures and should give its earlier policy measures time to work, while she was sceptical about any further interest rate cuts given the increasing side effects of such measure. Domestic data focus this week will be on EuroZone Consumer Confidence as well as the ECB’s Economic Bulletin published on Thursday.

GBP UK’s consumer prices rose 0.6% YOY in August, sustaining the quickest pace of rise in price growth since Nov 2014. Retail price index decelerated last month (1.8% vs 1.9%) but producers’ price index quickened (0.8% vs 0.3%), depicting the impact of a weaker pound sterling. Britain’s firms hired 174k more workers from May-July, slightly more than the expected 171k. The nation’s jobless rate remained at its decade low of 4.90% while claimant count rate in August was also unchanged at 2.20%. Last month, 2.4k people filed for unemployment benefits after a drop of 3.6k claims in July. Job data pointed to contained short-term risks from Brexit fallout and was largely in line with earlier release of manufacturing and services PMI showing a broad base rebound in economic activities last month. After a data heavy week, only Public Sector Net Borrowing is o note this week.

JPY Nikkei reported that BoJ will focus its policy on lower rates as its expansion of asset buying is reaching its limit. The Bank of Japan will be likely to explore ways to clearly and narrowly define conditions allowing for the easing program to be lifted when the central bank’s board meets next week for a comprehensive assessment of its easing policy, according to Nikkei reports. All eyes are on the BOJ this week.

AUD Australian data released by National Australia Bank (NAB) sent mixed signals with one report pointing to moderation in business conditions in August yet another report showing that business sentiment has proven to be resilient to negative influences over recent months. Last month, business conditions index slipped (from 9 to 7) whilst business confidence index rose (from 4 to 6), the latter likely attributable to the recent 25bps cut in RBA’s cash rate, according to NAB. RBA meet this week and whilst no further rate cut is expected, traders will be keen to hear the bank’s latest assessment and outlook.

CAD The Canadian Dollar has been under continued pressure this week as an uptick in Fed rate hike expectations exerts downward pressure from a stronger USD. Alongside this we have seen a furtherance of the carry unwind in commodity currencies as risk appetite has diminished amidst a rise in global bond yields. Domestic data focus this week will be on CPI on Friday.