Weekly Forex Preview: Inflation and China GDP

Apr 11, 5:34 am
Bank of China_Chinese data

The Japanese yen was the strongest currency last week, rallying over 3.29% across the board. The gains in the yen came about as investors continued to shift bets to the safe haven asset. However, Gold prices did not see much of gains in similar terms. While the BoJ is put in a tight spot on the recent strengthening of the yen, officials fell short of verbally talking down the currency. The Swiss franc also posted some decent gains but mild in comparison to the yen. Oil prices posted a strong rally on Friday erasing the losses from the previous week. This led the Canadian dollar to bounce back strongly as well as economic data on Friday saw a strong jobs report with the Canadian unemployment rate falling to 7.10% from 7.30% previously.

Weekly Spot FX Performance – 08/04/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 08/04/2016 (Source: Finviz.com)

On the weaker side, the Australian dollar lost nearly 1.64% for the week. This came as the RBA initially made mention of the appreciation of the AUD, which started the Aussie’s descent. While the AUDUSD managed to trim the losses and rally back following the dovish FOMC minutes, the risk-off the sentiment on Friday hit the AUD and the Kiwi hard sending both the commodity-linked currencies lower.

Fundamentals for the Week 11/04 – 15/04

DateTimeCurrencyEventForecastPrevious
11-Apr 2:30CNYCPI y/y2.40%2.30%
CNYPPI y/y-4.60%-4.90%
12-Apr09:30GBPCPI y/y0.30%0.30%
GBPPPI Input m/m2.10%0.10%
GBPRPI y/y1.50%1.30%
13:30USDImport Prices m/m1.10%-0.30%
13-AprTentativeCNYTrade Balance203B210B
09:30GBPBOE Credit Conditions Survey
13:30USDCore Retail Sales m/m0.40%-0.10%
USDPPI m/m0.30%-0.20%
USDRetail Sales m/m0.10%-0.10%
USDCore PPI m/m0.10%0.00%
15:00CADBOC Monetary Policy Report
CADBOC Rate Statement
CADOvernight Rate0.50%0.50%
16:15CADBOC Press Conference
14-Apr02:30AUDEmployment Change18.6K0.3K
AUDUnemployment Rate5.90%5.80%
08:15CHFPPI m/m-0.20%-0.60%
10:00EURFinal CPI y/y-0.10%-0.10%
12:00GBPMPC Official Bank Rate Votes0-0-90-0-9
GBPMonetary Policy Summary
GBPOfficial Bank Rate0.50%0.50%
GBPAsset Purchase Facility375B375B
GBPMPC Asset Purchase Facility Votes0-0-90-0-9
13:30CADNHPI m/m0.20%0.10%
USDCPI m/m0.20%-0.20%
USDCore CPI m/m0.20%0.30%
USDUnemployment Claims270K267K
15:00USDFOMC Member Powell Speaks
15-Apr02:30AUDRBA Financial Stability Review
03:00CNYGDP q/y6.70%6.80%
CNYIndustrial Production y/y6.00%5.40%
CNYFixed Asset Investment ytd/y10.40%10.20%
CNYNBS Press Conference
13:30CADManufacturing Sales m/m-1.50%2.30%
USDEmpire State Manufacturing Index2.10.6
14:15USDCapacity Utilization Rate75.40%76.70%
USDIndustrial Production m/m-0.10%-0.50%
15:00USDPrelim UoM Consumer Sentiment92.391

Time: GMT

Currencies/Events to Watch this Week

AUD: Economic data from Australia for the week ahead is limited to the monthly jobs report. Analysts expect to see Australia’s unemployment rate rise from 5.80% to 5.90% in March while the monthly employment change is expected to rise 18.6k. With the unemployment rate forecasts dovish, a surprise could see the Australian dollar make significant gains.

CNY: It will be a busy week for China starting with the inflation data. Expectations are bullish with forecasts of 2.40% up from 2.30% previously while producer price index is expected to improve from -4.90% to -4.60%. China’s trade balance numbers are also due followed by the GDP report. Expectations are for a soft print of 6.70% in the first three months of the year, down from 6.80% previously. China’s industrial production is also expected to rise to 6.0%, up from 5.40%.

EUR: Data from the Eurozone will see the inflation numbers from Germany and the Eurozone. German final CPI is expected to be confirmed at 0.80% while French CPI is expected to be at 0.70%. For the Eurozone, the headline CPI is expected to fall 0.10% while core CPI is expected to remain unchanged at 1.0%.

GBP: It will be a busy week for the UK with the CPI data expected to show an increase of 0.30%, same as the previous month. The core CPI is also expected to rise 1.30%, following the previous month’s 1.20%. The Bank of England will be meeting over the week, but no changes are expected during this week’s event.

JPY: Data from Japan over the week includes the core machinery orders data which is expected to show a contraction of 11.80%, down from the previous period’s increase of 15.0%. Industrial production data is also expected to remain weak, posting a contraction of 6.20%.

CAD: The Bank of Canada will be meeting on Wednesday with the key lending rates expected to remain steady at 0.50%. The remainder of the week is very quiet with manufacturing sales data due out on Friday. Forecasts call for a 1.50% dip in manufacturing sales is expected after a previous period’s strong increase of 2.30%.

USD: While the week starts off on a quiet note for the US data, from Wednesday the economic calendar gets busy starting with retail sales and business inventories. On Thursday, consumer inflation data is due for release with expectations of a 0.20% increase in both the headline and the core CPI. Fed members continue their speeches over the week including FOMC members, Powell, Dudley, and Kaplan

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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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