Weekly Forex Preview: Its Yellen Week

Feb 08 2016, 6:21 am
weekly forex

Image via International Monetary Fund/Flickr

The markets continue to remain in a risk aversion mode with the Japanese Yen gaining 3.70% for the week followed by 3.23% gains in the Swiss Franc. The safe haven currencies continue to outperform and gained strongly especially last week as the US Dollar declined sharply during the week. The Yen erased all the losses from a week earlier when the BoJ announced its negative rates. The Australian dollar and the US Dollar were the laggards last week. The US January jobs report, released on Friday was a mixed bag with the headline print missing estimates. However the US unemployment rate fell to a 7-year low and helped support the US Dollar in the process.

Weekly Spot FX Performance – 05/02/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 05/02/2016 (Source: Finviz.com)

The week ahead is relatively quiet in comparison to last week which was busy with PMI data and Central Bank meetings. Data from China is soft, besides the markets being closed for the most part of the week on account of the Lunar holiday.

Fundamentals for the Week 08/02 – 12/02

Date Time Currency Detail Forecast Previous
08-Feb 01:50 JPY Current Account 1.59T 1.42T
JPY BOJ Summary of Opinions
JPY Bank Lending y/y 2.20%
All Day CNY Bank Holiday
03:30 JPY Average Cash Earnings y/y 0.70% 0.00%
07:00 JPY Economy Watchers Sentiment 48.5 48.7
09:00 EUR German Industrial Production m/m 0.20% -0.30%
11:30 EUR Sentix Investor Confidence 7.2 9.6
15:15 CAD Housing Starts 185K 173K
15:30 CAD Building Permits m/m -19.60%
17:00 USD Labor Market Conditions Index m/m 2.9
09-Feb 01:50 JPY M2 Money Stock y/y 3.10% 3.00%
02:30 AUD NAB Business Confidence 3
08:00 JPY Prelim Machine Tool Orders y/y -25.70%
08:45 CHF Unemployment Rate 3.50% 3.40%
09:00 EUR German Trade Balance 19.4B 19.7B
11:30 GBP Trade Balance -10.4B -10.6B
13:00 USD NFIB Small Business Index 94.6 95.2
USD Wholesale Inventories m/m -0.10% -0.30%
10-Feb 01:30 AUD Westpac Consumer Sentiment -3.50%
01:50 JPY PPI y/y -2.80% -3.40%
02:00 AUD HIA New Home Sales m/m -2.70%
09:45 EUR French Industrial Production m/m 0.20% -0.90%
10th-16th CNY M2 Money Supply y/y 13.50% 13.30%
10th-16th CNY New Loans 1900B 598B
11:00 EUR Italian Industrial Production m/m 0.30% -0.50%
11:30 GBP Manufacturing Production m/m 0.00% -0.40%
GBP Industrial Production m/m -0.10% -0.70%
17:00 GBP NIESR GDP Estimate 0.60%
USD Fed Chair Yellen Testifies
17:30 USD Crude Oil Inventories 7.8M
11-Feb 02:00 AUD MI Inflation Expectations 3.60%
02:01 GBP RICS House Price Balance 52% 50%
10:15 CHF CPI m/m -0.30% -0.40%
15:30 CAD NHPI m/m 0.30% 0.20%
USD Unemployment Claims 287K 285K
17:00 USD Fed Chair Yellen Testifies
23:45 NZD FPI m/m -0.80%
12-Feb 00:30 AUD RBA Gov Stevens Speaks
02:30 AUD Home Loans m/m 2.90% 1.80%
09:00 EUR German Prelim GDP q/q 0.30% 0.30%
EUR German Final CPI m/m -0.80% -0.80%
EUR German WPI m/m 0.20% -0.80%
09:45 EUR French Prelim Non-Farm Payrolls q/q 0.10% 0.00%
11:00 EUR Italian Prelim GDP q/q 0.30% 0.20%
11:30 GBP Construction Output m/m 2.10% -0.50%
12:00 EUR Flash GDP q/q 0.30% 0.30%
EUR Industrial Production m/m 0.30% -0.70%
15:30 USD Core Retail Sales m/m 0.00% -0.10%
USD Retail Sales m/m 0.10% -0.10%
USD Import Prices m/m -1.40% -1.20%
17:00 USD Prelim UoM Consumer Sentiment 92.6 92
USD FOMC Member Dudley Speaks
USD Business Inventories m/m 0.10% -0.20%
USD Prelim UoM Inflation Expectations 2.50%

Time: GMT+2

Currencies/Events to Watch this Week

AUD: After last week’s busy calendar, the AUD is looking to a rather slow week as far as economic data from Australia is concerned. Most of the data is tier-2 and unlikely to bring any major changes to the AUD. RBA Governor Stevens is due to speak on Friday followed by home loans data later, which is expected to rise 2.90%, up from 1.80% previously.

JPY: Data from Japan this week includes the average cash earnings which are expected to rise 0.70% on a year on year basis. Cash earnings stayed flat previously. A pick up in cash earnings is seen as a gauge in consumer prices picking up and if the actual print fails to meet estimates, the BoJ could start looking into further ways to stoke inflation. Besides the average cash earnings data, there are no other major releases from Japan this week.

EUR: Flash GDP numbers from Eurozone will take precedence this week but expectations are for a 0.30% growth, same the previous quarter. The EU commission, which released its forecasts last week, expects Eurozone GDP to stay flat for 2016. Germany’s GDP numbers are also due including French industrial production numbers. The Euro, however, is unlikely to be moved by the data this week and the focus would turn more to the US economic data instead.

GBP: UK trade balance and manufacturing production numbers are due this week and ones which will take importance. Manufacturing and industrial production continues to remain weak in the UK over the past few months. Expectations for this week’s release is for an unchanged print of 0.0% for manufacturing production while industrial production is expected to fall -0.10% after declining -0.70% previously.

CAD: Data from Canada is soft this coming week with housing starts and building permits due. Expectations are for housing starts to have increased 185k up from 173k from the previous month. The CAD, however, is likely to look to Crude Oil prices for cues in light of softer economic data.

USD: This week is another busy week for the US Dollar. Janet Yellen is due to give her semi-annual testimony to the US Congress this week on Wednesday and Thursday. In light of recent dovish comments from Fed officials and a dovish FOMC statement in January, the markets will be very eager to hear Ms. Yellen’s views. Besides the Fed speak, US retail sales numbers are due, with nearly flat expectations and UoM consumer sentiment and inflation expectations make up for the remainder of the week.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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