Weekly Forex Forecast: July 20 – 24

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The British Pound Sterling emerged on the top last week, gaining 0.55% for the week. Despite a few hiccups in the economic data such as weaker than expected average earnings index and a relatively flat CPI numbers, the GBP got a boost as the BoE Governor, Mark Carney, in his speech last week noted that the time for lower interest rates was ending, signaling a shift in the BoE’s policy towards hiking interest rates. The markets took this as a signal that the BoE would start to hike rates in the coming months. Currently, the markets are pricing in a rate hike in the first half of 2016. The US Dollar came a close second and again it was largely due to Janet Yellen who testified to the Senate Banking Committee, where she reiterated the Fed’s optimistic view for rate hikes this year.

Weekly Spot FX Performance – 17/07/2015 (Source: Finviz.com)
Weekly Spot FX Performance – 17/07/2015 (Source: Finviz.com)

The New Zealand Dollar was the weakest performing currency last week losing over -3%. The Kiwi was under pressure as the CPI data failed to rise as expected and the Global dairy trade index continued to post in the negative. The weak economic data alongside a lackluster inflation numbers is likely to keep the NZD under pressure as the RBNZ could potentially cut rates even further. Overall, last week saw a return to the fundamentals as monetary policy divergence took over the markets as the Greek headline started to recede.

Fundamentals for the Week July 20 – 24

Date Time Currency Detail Forecast Previous
20-Jul 02:01 GBP Rightmove HPI m/m 3.00%
All Day JPY Bank Holiday
09:00 EUR German PPI m/m 0.00% 0.00%
11:00 EUR Current Account 23.1B 22.3B
13:00 EUR German Buba Monthly Report
15:30 CAD Wholesale Sales m/m 0.10% 1.90%
21-Jul 01:45 NZD Visitor Arrivals m/m 0.10%
04:30 AUD Monetary Policy Meeting Minutes
06:00 NZD Credit Card Spending y/y 7.10%
21st-24th CNY Foreign Direct Investment ytd/y 10.10%
09:00 CHF Trade Balance 2.78B 3.43B
21st-24th CNY New Loans 1050B 901B
11:30 GBP Public Sector Net Borrowing 8.6B 9.4B
22-Jul 03:30 AUD MI Leading Index m/m -0.10%
04:30 AUD CPI q/q 0.80% 0.20%
AUD Trimmed Mean CPI q/q 0.60% 0.60%
06:05 AUD RBA Gov Stevens Speaks
07:30 JPY All Industries Activity m/m -0.50% 0.10%
11:30 GBP MPC Official Bank Rate Votes 0-0-9 0-0-9
GBP MPC Asset Purchase Facility Votes 0-0-9 0-0-9
12:00 EUR Italian Retail Sales m/m 0.20% 0.70%
16:00 USD HPI m/m 0.50% 0.30%
17:00 USD Existing Home Sales 5.40M 5.35M
17:30 USD Crude Oil Inventories -4.3M
23-Jul 00:00 NZD Official Cash Rate 3.25% 3.25%
NZD RBNZ Rate Statement
02:50 JPY Trade Balance -0.25T -0.18T
05:00 CNY CB Leading Index m/m 1.10%
10:00 EUR Spanish Unemployment Rate 22.90% 23.80%
11:30 GBP Retail Sales m/m 0.40% 0.20%
GBP BBA Mortgage Approvals 43.5K 42.5K
15:30 CAD Core Retail Sales m/m 0.70% -0.60%
CAD Retail Sales m/m 0.40% -0.10%
USD Unemployment Claims 285K 281K
17:00 EUR Consumer Confidence -6 -6
USD CB Leading Index m/m 0.10% 0.70%
17:30 USD Natural Gas Storage 99B
24-Jul 01:45 NZD Trade Balance 100M 350M
04:35 JPY Flash Manufacturing PMI 50.5 50.1
04:45 CNY Markit Flash Manufacturing PMI 49.8 49.4
10:00 EUR French Flash Manufacturing PMI 51.1 50.7
EUR French Flash Services PMI 53.9 54.1
10:30 EUR German Flash Manufacturing PMI 52.1 51.9
EUR German Flash Services PMI 54.1 53.8
11:00 EUR Flash Manufacturing PMI 52.5 52.5
EUR Flash Services PMI 54.2 54.4
16:00 EUR Belgian NBB Business Climate -4 -3.9
16:45 USD Flash Manufacturing PMI 53.7 53.6
17:00 USD New Home Sales 543K 546K

 

Currencies/Events to Watch this Week

RBA Monetary Policy Minutes: The RBA will be releasing its monetary policy minutes this week as market participants look for clues into the various board members’ view of the Australian economy. Although the RBA left rates unchanged, the minutes could potentially reveal the future course of action. Also on the tap will be the quarterly CPI data from Australia, which is expected to rise to 0.8% for the quarter, after a soft print at 0.2% a quarter before.

Canada Sales: The week ahead is quiet for the Canadian dollar which weakened significantly as a result of a rate cut from the BoC last week. The week ahead will see the wholesale sales and retail sales numbers from Canada. It is expected that the retail sales for the month will rise 0.7% on the core and 0.4% on the headline. A miss of estimates is likely to see the Canadian dollar weaken even more.

Europe PMI’s: The week ahead will see quite a bit of data from the Eurozone including flash services and manufacturing PMI data. For the Eurozone the markets expect to see a flat reading. With Greece talks now showing signs of progress as the government managed to quickly pass the new reforms bill, the onus is on the regional Eurozone parliaments that are expected to pass the legislation. We already saw the Euro weaken last week after the fears of a Grexit dissipated, thus showing the markets returning back to the fundamentals.

BoE Minutes: The markets will be keen to see how the BoE members voted at its last policy setting meeting. With hawkish comments from BoE’s Carney, a change in the voting structure which currently sees all members unanimous to keeping policy unchanged could pose significant upside risks for the British Pound. This week will also see the UK retail sales data, which is expected to stabilize to 0.4% after posting a weak gain of 0.2% last month.

RBNZ Monetary Policy: Will the RBNZ cut rates yet again or will they put policy on hold until more data comes through for scrutiny? The markets no matter what are bearish on the Kiwi Dollar and with the recent quarterly CPI showing no major signs of a rebound; it would be a close call. Expectations, heading into the RBNZ policy meeting are for the New Zealand Central Bank to leave rates unchanged at 3.25%.

Slow week for the Greenback: There are no major market moving economic events for the week ahead from the US with only the existing home sales, new home sales and flash manufacturing data on the tap. The Greenback is likely to continue to drift higher from last week.

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