Weekly Forex Preview: RBA and NFP in focus

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Supported by strong growth numbers, the US Dollar closed the week on a firm footing against the Euro and the Yen. Economic data over the week saw Q4 GDP surprising to the upside, rising 1.0% against expectations of a dip to 0.40%. For the first quarter, durable goods orders surged strongly including a broadly positive mix on the housing data. The economic numbers were further strengthened by US inflation finally starting to move in the right direction which has brought back to life further rate hikes from the Federal Reserve. The economic data this week marks the first week of positive numbers from the US which saw the Yen ease back as the markets showed signs of easing risk aversion.

Weekly Spot FX Performance – 26/02/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 26/02/2016 (Source: Finviz.com)

The Canadian Dollar ended the week on a high note as volatility in Crude Oil prices lifted the CAD across the board. The US Dollar was the second top performing currency last week while the British Pound lost over 3.70% during the week followed by the Euro which is down -1.81% and into its second week of declines.

Chart of the Week (22/02 – 26/02) – GBPCAD

GBPCAD (1.875): Down -5.23% or 1033.4 Pips for the week
GBPCAD (1.875): Down -5.23% or 1033.4 Pips for the week

Fundamentals for the Week 29/02 – 04/03

Date Time Currency Detail Forecast Previous
29-Feb 01:50 JPY Retail Sales y/y 0.20% -1.10%
JPY Prelim Industrial Production m/m 3.20% -1.70%
02:30 AUD Company Operating Profits q/q -1.70% 1.30%
AUD Private Sector Credit m/m 0.50% 0.50%
07:00 JPY Housing Starts y/y -0.20% -1.30%
09:00 EUR German Retail Sales m/m 0.30% -0.20%
12:00 EUR CPI Flash Estimate y/y 0.00% 0.30%
EUR Core CPI Flash Estimate y/y 0.90% 1.00%
15:30 CAD Current Account -16.8B -16.2B
16:45 USD Chicago PMI 52.1 55.6
17:00 USD Pending Home Sales m/m 0.60% 0.10%
01-Mar 00:30 AUD AIG Manufacturing Index 51.5
01:30 JPY Household Spending y/y -2.50% -4.40%
JPY Unemployment Rate 3.30% 3.30%
02:30 AUD Building Approvals m/m -2.90% 9.20%
AUD Current Account -19.8B -18.1B
03:00 CNY Manufacturing PMI 49.4 49.4
CNY Non-Manufacturing PMI 53.5
03:45 CNY Caixin Manufacturing PMI 48.4 48.4
04:00 JPY Final Manufacturing PMI 50.2 50.2
05:30 AUD Cash Rate 2.00% 2.00%
AUD RBA Rate Statement
06:30 USD FOMC Member Dudley Speaks
10:15 CHF Retail Sales y/y -1.20% -1.60%
10:30 CHF Manufacturing PMI 49.6 50
EUR German Final Manufacturing PMI 50.2 50.2
11:00 EUR Final Manufacturing PMI 51 51
11:30 GBP Manufacturing PMI 52.3 52.9
12:00 EUR Unemployment Rate 10.40% 10.40%
15:30 CAD GDP m/m 0.10% 0.30%
16:30 CAD RBC Manufacturing PMI 49.3
16:45 USD Final Manufacturing PMI 51 51
17:00 USD ISM Manufacturing PMI 48.5 48.2
USD Construction Spending m/m 0.50% 0.10%
USD ISM Manufacturing Prices 35.5 33.5
02-Mar 02:30 AUD GDP q/q  0.50% 0.90%
08:45 CHF GDP q/q 0.20% 0.00%
11:30 GBP Construction PMI 55.5 55
GBP MPC Member Broadbent Speaks
15:15 USD ADP Non-Farm Employment Change 185K 205K
16:00 GBP MPC Member Cunliffe Speaks
17:30 USD Crude Oil Inventories 3.5M
03-Mar 00:30 AUD AIG Services Index 48.4
02:30 AUD Trade Balance -3.22B -3.54B
03:45 CNY Caixin Services PMI 52.6 52.4
11:00 EUR Final Services PMI 53 53
11:30 GBP Services PMI 55.1 55.6
12:00 EUR Retail Sales m/m 0.10% 0.30%
15:30 USD Unemployment Claims 271K 272K
16:45 USD Final Services PMI 49.8 49.8
17:00 USD ISM Non-Manufacturing PMI 49.8 53.5
USD Factory Orders m/m 2.10% -2.90%
19:45 GBP MPC Member Haldane Speaks
04-Mar 02:30 AUD Retail Sales m/m 0.40% 0.00%
03:30 JPY Average Cash Earnings y/y 0.20% -0.20%
15:30 CAD Trade Balance -1.0B -0.6B
CAD Labor Productivity q/q 0.20% 0.10%
USD Average Hourly Earnings m/m 0.20% 0.50%
USD Non-Farm Employment Change 195K 151K
USD Trade Balance -43.5B -43.4B
USD Unemployment Rate 4.90% 4.90%
17:00 CAD Ivey PMI 66

Time: GMT+2

Currencies/Events to Watch this Week

AUD: The Australian dollar comes under significant risk this week as the week starts with the RBA’s interest rate decision on 1st of March. While rates are expected to stay unchanged at 2.0%, the RBA could potentially come out more dovish than last time with the AUD’s exchange rate being mentioned as well. A steady rally in the Aussie over the past week has seen the AUDUSD trade close to the $0.72 levels. Following the RBA’s statement, Australian quarterly GDP numbers are also expected later in the week with forecasts pointing to a dip to 0.50%, from 0.90% GDP growth seen a quarter before. The trading week ends with the Australian retail sales numbers on Friday forecasted to rise 0.40%.

JPY: The Yen could take a back seat this week with no major economic releases due. However, Monday starts with retail sales forecasted to grow 0.20% on a year over year basis, following a decline of -1.10% previously. On Friday Japan’s average cash earnings numbers are due with expectations of an increase to 0.20%. Cash earnings would be an important number to watch in light of last week’s BoJ inflation which increased 1.10%, down 1.20% previously..

EUR: From the Eurozone the week will see Services and Manufacturing PMI data coming out. Flash estimates released last week showed a broad slowdown which if confirmed by the final PMI data this week could keep the Euro pressured to the downside. Eurozone final inflation numbers are also up this week with expectations of a flat print on the headline at 0.0% while the Core CPI is expected to rise at a slower pace of 0.90%. Among other data from the Eurozone, unemployment rate is expected to remain unchanged at 10.4%, which was the lowest unemployment rate since 2012.

GBP: For the British Pound it will be interesting to see how the GBP trades this week. Monthly manufacturing construction and services PMI numbers are due with mixed expectations. However, a lot of BoE MPC members are due to speak over the week. Expect references to the Brexit campaign ahead of the BoE’s report due to be released on March 8th.

CHF: The Swiss Franc ignored dovish comments from SNB Chairman Thomas Jordan last week who hinted that prolonged use of negative rates would erase the intended consequences. The Swiss Franc remains fairly supported and this week’s data includes the quarterly GDP data which is expected to show that the Swiss economy expanded at a pace of 0.20%. Retail sales are also due with dovish forecasts pointing to a decline of -1.20% on a year over year basis.

USD: Data from the US is packed this week following a quiet Monday. ISM manufacturing is due on Tuesday with expectations of a soft print of 48.5 after last month’s dip to 48.2 pointing to a contraction in the manufacturing sector. ADP private payrolls on Wednesday are expected to show an increase of 185k jobs, a somewhat subdued number following 205k jobs added in January. On Friday, the February jobs report will be released which is expected to show that the US unemployment rate was steady at 4.90% while the average jobs added to the US economy is expected to rise 195k up from 151k from the previous month. Average hourly earnings are however expected to rise slower than the previous month at 0.20%.

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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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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.