FX Week Ahead: A Date With the BoJ

Jul 25, 6:14 am
Recession Japan stock

The US dollar emerged as the top currency last week as the US dollar index posted a 4-month high. Boosted by broadly better than expected economic data especially on the housing sector the dollar kept its gains into the weekly close ahead of the FOMC meeting this coming week. The Swiss franc was down 0.53% against the US dollar but managed to remain the second best currency across the board.

Weekly Spot FX Performance – 22/07/2016
Weekly Spot FX Performance – 22/07/2016

The Turkish lira closed the week 3.29% lower against the US dollar following last week’s political developments in the country. The New Zealand dollar was the second worst currency last week, closing over 2% for the week as investors started to price in RBNZ rate cuts at the August meeting. Last week’s RBNZ economic report showed that the central bank was willing to lower rates following the weaker pace of inflation and a rising exchange rate.

Economic Calendar for the Week 25/07 – 29/07

Date Time Currency Event Forecast Previous
25-Jul  0:50 JPY Trade Balance 0.24T 0.27T
09:00 EUR German Ifo Business Climate 107.7 108.7
23:45 NZD Trade Balance 128M 358M
26-Jul 00:50 JPY SPPI y/y 0.10% 0.20%
USD S&P/CS Composite-20 HPI y/y 5.60% 5.40%
14:45 USD Flash Services PMI 51.2 51.4
15:00 USD CB Consumer Confidence 95.6 98
USD New Home Sales 560K 551K
USD Richmond Manufacturing Index -4 -7
27-Jul 02:30 AUD CPI q/q 0.40% -0.20%
AUD Trimmed Mean CPI q/q 0.40% 0.20%
EUR German Import Prices m/m 0.60% 0.90%
EUR GfK German Consumer Climate 9.9 10.1
09:00 EUR M3 Money Supply y/y 5.00% 4.90%
EUR Private Loans y/y 1.70% 1.60%
09:30 GBP Prelim GDP q/q 0.50% 0.40%
GBP Index of Services 3m/3m 0.30% 0.50%
13:30 USD Core Durable Goods Orders m/m 0.30% -0.30%
USD Durable Goods Orders m/m -1.10% -2.30%
15:00 USD Pending Home Sales m/m 1.90% -3.70%
19:00 USD FOMC Statement
USD Federal Funds Rate <0.50% <0.50%
28-Jul 02:30 AUD Import Prices q/q 1.60% -3.00%
07:00 GBP Nationwide HPI m/m 0.00% 0.20%
All Day EUR German Prelim CPI m/m 0.20% 0.10%
08:55 EUR German Unemployment Change -3K -6K
13:30 USD Unemployment Claims 261K 253K
23:45 NZD Building Consents m/m -0.90%
29-Jul 00:05 GBP GfK Consumer Confidence -7 -9
00:30 JPY Household Spending y/y -0.40% -1.10%
JPY Tokyo Core CPI y/y -0.40% -0.50%
JPY National Core CPI y/y -0.40% -0.40%
JPY Unemployment Rate 3.20% 3.20%
00:50 JPY Retail Sales y/y -1.20% -2.10%
JPY Prelim Industrial Production m/m 0.60% -2.60%
02:00 NZD ANZ Business Confidence 20.2
02:30 AUD PPI q/q 0.20% -0.20%
AUD Private Sector Credit m/m 0.50% 0.40%
Tentative JPY Monetary Policy Statement
06:00 JPY BOJ Outlook Report
JPY BOJ Core CPI y/y 0.70% 0.80%
JPY Housing Starts y/y -2.80% 9.80%
06:30 EUR French Prelim GDP q/q 0.20% 0.60%
07:00 EUR German Retail Sales m/m 0.00% 0.90%
Tentative JPY BOJ Press Conference
07:45 EUR French Consumer Spending m/m 0.10% -0.70%
EUR French Prelim CPI m/m -0.30% 0.10%
08:00 CHF KOF Economic Barometer 101.6 102.4
EUR Spanish Flash CPI y/y -0.50% -0.80%
EUR Spanish Flash GDP q/q 0.70% 0.80%
09:30 GBP Net Lending to Individuals m/m 4.2B 4.3B
GBP M4 Money Supply m/m 0.40% 1.20%
GBP Mortgage Approvals 66K 67K
10:00 EUR CPI Flash Estimate y/y 0.10% 0.10%
EUR Core CPI Flash Estimate y/y 0.90% 0.90%
EUR Prelim Flash GDP q/q 0.30% 0.60%
EUR Italian Prelim CPI m/m 0.00% 0.10%
EUR Unemployment Rate 10.10% 10.10%
13:30 CAD GDP m/m -0.50% 0.10%
CAD RMPI m/m 3.20% 6.70%
CAD IPPI m/m 1.50% 1.10%
USD Advance GDP q/q 2.60% 1.10%
USD Advance GDP Price Index q/q 1.90% 0.40%
USD Employment Cost Index q/q 0.60% 0.60%
14:45 USD Chicago PMI 54.3 56.8
15:00 USD Revised UoM Consumer Sentiment 90.2 89.5
USD Revised UoM Inflation Expectations 2.80%
21:00 EUR EBA Bank Stress Test Results

Time: GMT+1

Currencies/Events to Watch this Week

AUD: Australia’s second quarter inflation data will be the main focus next week with the RBA rate cuts tied into the CPI release. Forecasts point to a 0.40% increase in inflation during the second quarter, while on a year over year basis, CPI is expected to rise 1.20%, slower than the 1.30% year over year increase in Q1. Besides the CPI data on Wednesday, export and import prices for the second quarter is due on Thursday and is expected to show a rebound of 2.90% and 1.60% respectively for Q2 following sharp declines in the previous quarter.

JPY: After starting off on a quiet note, the economic data from Japan will pick up steam on Thursday with fresh inflation figures due. The national core CPI is expected to fall 0.40%, the same pace as in May, while industrial production is expected to shrink 2.90% in July, extending the 0.40% declines from May. On Friday, the Bank of Japan’s monetary policy meeting is due. The central bank is expected to increase its monetary base by 20 trillion yen according to some news reports, but there is a chance that the BoJ could stand pat on policy in July as well. No changes are expected to the BoJ’s lending rate which is at -0.10%.

GBP: In the UK, the focus will be on the second quarter GDP estimates. Preliminary release on Wednesday is expected to show that the UK’s economy grew at a pace of 0.50%, higher than the 0.40% GDP growth rate seen in the first quarter. On a year over year basis, UK’s GDP is expected to rise 2.10%. The economic calendar from the UK remains light for the most of the week.

EUR: Data from the Eurozone next week will see Germany’s retail sales which are expected to stay flat on the month in June after rising 0.90% in May. Germany’s unemployment data will also be coming out on Thursday and is expected to show the unemployment rate staying steady at 6.10%. Consumer prices are expected to rise 0.30% in July according to the flash estimates, a modest pick up from 0.10% increase in June on a month over month basis. The Eurozone flash CPI estimates are also up later in the week with the core CPI expected rise 0.90%, the same pace as in June.

CAD: Economic data from Canada next week is limited to the GDP release on Friday, leaving most of the flows to the US-centric data. GDP for May is forecast to fall 0.50%; this follows April, an increase of 0.10%. The BoC, in its latest monetary policy meeting, noted that GDP expectation was lower at 1.30% with the previous estimates of 1.70%. So far, Canada’s GDP was recorded at 1.10% in April.

USD: USD: The FOMC meeting due on July 27 will be the main event in focus next week. Although economic data last week was limited to the housing markets, the Fed is expected to turn more upbeat after June’s strong jobs report. Still, a single jobs report is unlikely to see the Fed hike rates this week especially with no press conference being scheduled. Later in the week, the focus turns to the first estimate of the second quarter GDP. Economists forecast a GDP growth rate of 2.6% in the second quarter, modestly higher compared to Q1’s 1.10% increase. On the economic front, consumer confidence and new home sales data followed by durable goods orders will be the other events to watch out for over 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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