FX Week Ahead: BoE, RBA Rate Cuts Eyed

Aug 01, 7:19 am
RBA

After closing the week before as the top performing currency, the US dollar fell against its peers turning out to be the weakest currency for the week ending July 29. The dollar turned weaker after the FOMC statement failed to convince investors on a September rate hike and the declines strengthened following the BoJ policy meeting and weak GDP data on Friday.

Weekly Spot FX Performance – 29/07/2016
Weekly Spot FX Performance – 29/07/2016

The Japanese yen was obviously the top currency last week, gaining over 3.0% against the dollar. The Bank of Japan failed to live up to market expectations despite expanding its ETF purchases; the yen rose sharply on Friday erasing its losses from the previous week. Gold also rallied during the week with gains of nearly 2.15%, while the New Zealand dollar which has been posting a steady decline a week ago managed to recover quite strongly.

Economic Calendar for the Week 01/08 – 05/08

Date Time Currency Detail Forecast Previous
01-Aug 02:00 AUD MI Inflation Gauge m/m 0.60%
CNY Manufacturing PMI 50.1 50
CNY Non-Manufacturing PMI 53.7
02:15 USD FOMC Member Dudley Speaks
02:45 CNY Caixin Manufacturing PMI 48.8 48.6
03:00 JPY Final Manufacturing PMI 49 49
08:15 EUR Spanish Manufacturing PMI 51.6 52.2
08:45 EUR Italian Manufacturing PMI 52.5 53.5
08:50 EUR French Final Manufacturing PMI 48.6 48.6
08:55 EUR German Final Manufacturing PMI 53.7 53.7
09:00 EUR Final Manufacturing PMI 51.9 51.9
09:30 GBP Manufacturing PMI 49.1 49.1
14:45 USD Final Manufacturing PMI 52.9 52.9
15:00 USD ISM Manufacturing PMI 53.1 53.2
USD Construction Spending m/m 0.50% -0.80%
USD ISM Manufacturing Prices 61 60.5
02-Aug 00:50 JPY Monetary Base y/y 24.30% 25.40%
02:30 AUD Building Approvals m/m 0.90% -5.20%
AUD Trade Balance -2.00B -2.22B
04:00 NZD Inflation Expectations q/q 1.60%
05:30 AUD Cash Rate 1.50% 1.75%
AUD RBA Rate Statement
06:00 JPY Consumer Confidence 42.2 41.8
08:15 CHF Retail Sales y/y -2.00% -1.60%
08:30 CHF Manufacturing PMI 51.9 51.6
09:30 GBP Construction PMI 44.2 46
10:00 EUR PPI m/m 0.40% 0.60%
13:30 USD Core PCE Price Index m/m 0.10% 0.20%
USD Personal Spending m/m 0.30% 0.40%
USD Personal Income m/m 0.30% 0.20%
23:45 NZD Labor Cost Index q/q 0.40% 0.40%
03-Aug 00:50 JPY Monetary Policy Meeting Minutes
02:45 CNY Caixin Services PMI 52.9 52.7
08:15 EUR Spanish Services PMI 55.1 56
08:45 EUR Italian Services PMI 51.1 51.9
08:50 EUR French Final Services PMI 50.3 50.3
08:55 EUR German Final Services PMI 54.6 54.6
09:00 EUR Final Services PMI 52.8 52.7
09:30 GBP Services PMI 47.4 47.4
10:00 EUR Retail Sales m/m 0.00% 0.40%
13:15 USD ADP Non-Farm Employment Change 171K 172K
14:45 USD Final Services PMI 51 50.9
15:00 USD ISM Non-Manufacturing PMI 56 56.5
04-Aug 02:30 AUD Retail Sales m/m 0.30% 0.20%
09:00 EUR ECB Economic Bulletin
12:00 GBP BOE Inflation Report
GBP MPC Official Bank Rate Votes 0-9-0 0-1-8
GBP Monetary Policy Summary
GBP Official Bank Rate 0.25% 0.50%
GBP Asset Purchase Facility 375B 375B
GBP MPC Asset Purchase Facility Votes 0-0-9 0-0-9
12:30 GBP BOE Gov Carney Speaks
13:30 USD Unemployment Claims 265K 266K
15:00 USD Factory Orders m/m -1.80% -1.00%
05-Aug 01:00 JPY Average Cash Earnings y/y 0.40% -0.10%
02:30 AUD RBA Monetary Policy Statement
06:00 JPY Leading Indicators 99.60% 99.70%
07:00 EUR German Factory Orders m/m 0.50% 0.00%
07:45 EUR French Trade Balance -3.9B -2.8B
13:30 CAD Employment Change 10.2K -0.7K
CAD Trade Balance -2.6B -3.3B
CAD Unemployment Rate 6.90% 6.80%
USD Average Hourly Earnings m/m 0.20% 0.10%
USD Non-Farm Employment Change 180K 287K
USD Unemployment Rate 4.80% 4.90%
USD Trade Balance -42.1B -41.1B
15:00 CAD Ivey PMI 51.9 51.7
20:00 USD Consumer Credit m/m 15.5B 18.6B

Time: GMT+1

Currencies/Events to Watch this Week

AUD: The main focus for the Australian dollar next week will be the RBA meeting due on August 2. Median forecasts call for a 25bps rate cut, effectively taking the RBA’s cash rate to 1.50% from the current 1.75%. The RBA had previously cut interest rates in May this year. A rather soft inflation print released last week has stoked expectations for the RBA’s dovish stand. However, the markets could be at risk here as the August meeting marks the final policy meeting of Governor Glenn Stevens, which could mean that monetary policy could remain unchanged as he hands over the reins of the RBA to the new Governor Philip Lowe. On Friday, the RBA will be releasing its quarterly forecasts which could see some more downside revisions to the inflation outlook.

NZD: From New Zealand, the quarterly inflation expectations will be the main event that could set the tone for the RBNZ’s policy stance. Inflation expectations have remained anchored to 1.60% for the past two-quarters. Later in the week, the quarterly labor market data is expected to show the quarterly unemployment rate which increased to 5.70% in the first three months of the year is expected to remain unchanged.

JPY: Following the Bank of Japan’s meeting on Friday, the markets will be looking to a slow week as far as economic releases are concerned. On Monday, the final manufacturing PMI number will be out and later on August 3rd, the monetary policy meeting minutes will be released. On Tuesday, August 2, Prime Minister Shinzo Abe is expected to announce more details on the proposed ¥28 trillion fiscal stimulus plan, which could keep the yen crosses volatile.

EUR: From the Eurozone, the start of a new trading month puts the focus on the PMI surveys from Germany and France and the Eurozone as a whole. Producer prices index will be released on Tuesday and follow the increase to 0.60% in June; expectations call for the PPI to moderate to a 0.40% increase. Economic data is more or less light from the Eurozone with no other major events scheduled with the exception of the PMI surveys.

GBP: A very busy and an important week for the British pound. The monthly PMI surveys will be closely watched as the flash survey released previously by Markit showed that manufacturing and services PMI both fell into contraction in July. On Thursday, the Bank of England’s meeting is due with expectations riding high that the central bank will cut interest rates by 25bps and BoE Governor; Mark Carney will be speaking to the press later in the day.

CAD: A slow week for the Canadian dollar with only Friday seeing the release of the monthly employment data and trade balance. The Canadian economy lost 0.7k jobs in June while the unemployment rate fell to 6.80%, falling for three straight months. For July, market consensus points to at the unemployment rate rising to 6.90%, while the economy is expected to add 9k jobs during the month.

USD: Economic data from the US is packed this week. On Monday, the ISM manufacturing PMI will be the main focus including construction spending. Following the increase in ISM manufacturing PMI to 53.2 in June, expectations call for 53.1 in July. On Wednesday, August 3, the ADP private payrolls data is expected to showing that private employers added 170k jobs in July, following the 172k print in June and eventually, set the stage for the nonfarm payrolls data due on Friday. After beating estimates and rising 287k, expectations for July are pointing to modest 181k jobs. Focus will be on how big a revision for June jobs data. The unemployment rate, which stood at 4.90% a month ago is expected to fall to 4.80% while average hourly earnings are expected to rise 0.20% from June.

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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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