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

Jun 20, 4:57 am

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

20-Jun00:01GBPRightmove HPI m/m0.40%
00:50JPYTrade Balance0.13T0.43T
07:00EURGerman PPI m/m0.40%0.10%
11:00EURGerman Buba Monthly Report
13:30CADWholesale Sales m/m0.20%-1.00%
15:30AUDCB Leading Index m/m0.10%
21-Jun00:25AUDRBA Assist Gov Debelle Speaks
00:50JPYMonetary Policy Meeting Minutes
02:30AUDMonetary Policy Meeting Minutes
AUDHPI q/q0.80%0.20%
05:30JPYAll Industries Activity m/m1.30%0.10%
07:00CHFTrade Balance2.88B2.50B
TentativeEURGerman Constitutional Court Ruling
09:30GBPPublic Sector Net Borrowing9.5B6.6B
10:00EURGerman ZEW Economic Sentiment5.16.4
EURZEW Economic Sentiment15.316.8
11:00GBPCBI Industrial Order Expectations-10-8
15:00USDFed Chair Yellen Testifies
23:45NZDVisitor Arrivals m/m-1.10%
22-Jun01:30AUDMI Leading Index m/m0.20%
04:00NZDCredit Card Spending y/y9.10%
10:00CHFZEW Economic Expectations17.5
TentativeEURGerman 30-y Bond Auction0.88|1.4
TentativeEURLong Term Refinancing Option7.3B
13:30CADCore Retail Sales m/m-0.30%
CADRetail Sales m/m-1.00%
14:00CHFSNB Quarterly Bulletin
CNYCB Leading Index m/m0.10%
USDHPI m/m0.60%0.70%
15:00EURConsumer Confidence-7-7
USDFed Chair Yellen Testifies
USDExisting Home Sales5.53M5.45M
15:30USDCrude Oil Inventories-0.9M
23-Jun03:00JPYFlash Manufacturing PMI48.247.7
08:00EURFrench Flash Manufacturing PMI48.848.4
EURFrench Flash Services PMI51.551.6
08:30EURGerman Flash Manufacturing PMI52.152.1
EURGerman Flash Services PMI5555.2
09:00EURFlash Manufacturing PMI51.451.5
EURFlash Services PMI53.253.3
09:15AUDRBA Assist Gov Debelle Speaks
All DayGBPUK EU Referendum Vote
13:30USDUnemployment Claims271K277K
14:00EURBelgian NBB Business Climate-2.9-2.8
14:45USDFlash Manufacturing PMI50.550.7
15:00USDNew Home Sales561K619K
USDCB Leading Index m/m0.20%0.60%
24-Jun00:50JPYBOJ Summary of Opinions
JPYSPPI y/y0.10%0.20%
09:00EURGerman Ifo Business Climate107.6107.7
EURItalian Retail Sales m/m0.20%-0.60%
09:30GBPBBA Mortgage Approvals37.9K40.1K
13:30USDCore Durable Goods Orders m/m0.10%0.50%
USDDurable Goods Orders m/m-0.80%
15:00USDRevised UoM Consumer Sentiment94.294.3
USDRevised UoM Inflation Expectations2.40%

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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