Week ahead in FX: It’s all about Brexit!

Jun 20 2016, 4:57 am
GBP

The yen was back at the top of the currency board last week with risk aversion on account of market uncertainty and the BoJ’s inaction. The yen was up 2.72% for the week, as USDJPY hovers near the 104 level. Earlier in the week, the dollar slipped below 104 briefly before managing to close modestly higher. The sterling was interestingly higher over the week, closing with 0.67% gains. All the central bank meetings last week saw no changes to policy ahead of this Thursday’s UK referendum vote.

Weekly Spot FX Performance – 18/06/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 18/06/2016 (Source: Finviz.com)

The Canadian dollar was the weakest this week, losing 0.91%. Oil prices were seen slipping sharply through the first part of the week, making the Canadian dollar weaker, besides the fact that inflation in Canada was fairly modest. The Kiwi was also weaker with mostly the US strength fluctuating the exchange rate.

Fundamentals for the Week 20/06 – 24/06

Date Time Currency Detail Forecast Previous
20-Jun 00:01 GBP Rightmove HPI m/m 0.40%
00:50 JPY Trade Balance 0.13T 0.43T
07:00 EUR German PPI m/m 0.40% 0.10%
11:00 EUR German Buba Monthly Report
13:30 CAD Wholesale Sales m/m 0.20% -1.00%
15:30 AUD CB Leading Index m/m 0.10%
21-Jun 00:25 AUD RBA Assist Gov Debelle Speaks
00:50 JPY Monetary Policy Meeting Minutes
02:30 AUD Monetary Policy Meeting Minutes
AUD HPI q/q 0.80% 0.20%
05:30 JPY All Industries Activity m/m 1.30% 0.10%
07:00 CHF Trade Balance 2.88B 2.50B
Tentative EUR German Constitutional Court Ruling
09:30 GBP Public Sector Net Borrowing 9.5B 6.6B
10:00 EUR German ZEW Economic Sentiment 5.1 6.4
EUR ZEW Economic Sentiment 15.3 16.8
11:00 GBP CBI Industrial Order Expectations -10 -8
15:00 USD Fed Chair Yellen Testifies
23:45 NZD Visitor Arrivals m/m -1.10%
22-Jun 01:30 AUD MI Leading Index m/m 0.20%
04:00 NZD Credit Card Spending y/y 9.10%
10:00 CHF ZEW Economic Expectations 17.5
Tentative EUR German 30-y Bond Auction 0.88|1.4
Tentative EUR Long Term Refinancing Option 7.3B
13:30 CAD Core Retail Sales m/m -0.30%
CAD Retail Sales m/m -1.00%
14:00 CHF SNB Quarterly Bulletin
CNY CB Leading Index m/m 0.10%
USD HPI m/m 0.60% 0.70%
15:00 EUR Consumer Confidence -7 -7
USD Fed Chair Yellen Testifies
USD Existing Home Sales 5.53M 5.45M
15:30 USD Crude Oil Inventories -0.9M
23-Jun 03:00 JPY Flash Manufacturing PMI 48.2 47.7
08:00 EUR French Flash Manufacturing PMI 48.8 48.4
EUR French Flash Services PMI 51.5 51.6
08:30 EUR German Flash Manufacturing PMI 52.1 52.1
EUR German Flash Services PMI 55 55.2
09:00 EUR Flash Manufacturing PMI 51.4 51.5
EUR Flash Services PMI 53.2 53.3
09:15 AUD RBA Assist Gov Debelle Speaks
All Day GBP UK EU Referendum Vote
13:30 USD Unemployment Claims 271K 277K
14:00 EUR Belgian NBB Business Climate -2.9 -2.8
14:45 USD Flash Manufacturing PMI 50.5 50.7
15:00 USD New Home Sales 561K 619K
USD CB Leading Index m/m 0.20% 0.60%
24-Jun 00:50 JPY BOJ Summary of Opinions
JPY SPPI y/y 0.10% 0.20%
09:00 EUR German Ifo Business Climate 107.6 107.7
EUR Italian Retail Sales m/m 0.20% -0.60%
09:30 GBP BBA Mortgage Approvals 37.9K 40.1K
13:30 USD Core Durable Goods Orders m/m 0.10% 0.50%
USD Durable Goods Orders m/m -0.80%
15:00 USD Revised UoM Consumer Sentiment 94.2 94.3
USD Revised UoM Inflation Expectations 2.40%

Time: GMT+1

Currencies/Events to Watch this Week

AUD: Following a busy last week, the AUD is likely to take a breather this coming week with the economic calendar staying light. Important data includes the monetary policy meeting minutes due for release on June 21 followed by the House Price Index for the quarter. With the exception of the RBA’s MPC, the Aussie is likely to take its cues from the US dollar, and the main Brexit even risk over the week.

NZD: A light week for the Kiwi, the only main data over the week is due next Sunday when the trade balance numbers will be released. As such, the Kiwi is likely to remain trading flat with the US dollar strength likely to dictate the flows.

JPY: The economic data next week includes the BoJ’s monetary policy meeting minutes due on Tuesday, June 21. Not much of data is expected to move the yen, with the focus being on Thursday’s Brexit referendum vote. The yen is likely to remain volatile into the event, especially after the BoJ refrained from making monetary policy changes last week. Also with the markets now confident that the BoJ is unlikely to intervene near the current levels, the yen could pose a significant risk of an upside.

EUR: Data from the Eurozone this week will see flash PMI numbers coming out. The German ZEW economic sentiment is due on June 21 followed by the German Ifo business climate on Friday. While Brexit referendum vote remains a big risk, on Sunday, Spanish parliamentary elections will be another geopolitical risk to watch out for.

GBP: All eyes will be on the Pound Sterling this week as the UK goes to polls on Thursday. With the economic calendar in the UK staying light, the GBP remains volatile to news flows on Brexit related headlines. Expect volatility to pick up starting Tuesday and could last through Friday.

CAD: Data from Canada is quiet for the week ahead with only the core retail sales and wholesale sales numbers coming out. The Canadian dollar is unlikely to be affected much by the Brexit vote, making USDCAD a key currency pair that traders who wish to avoid the Brexit risks could target.

USD: The US dollar heads into another crucial week. Besides the fact that the Brexit vote remains a key influencing factor, Janet Yellen will be testifying on Tuesday and Wednesday. Her comments are unlikely to see the markets move much. Later in the week, durable goods numbers are up on Friday.

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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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