Weekly Forex Preview: US GDP revised estimates

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The US Dollar saw a mixed week, stronger against the Euro and the British Pound while the commodity risk currencies posted gains. The Australian dollar closed the week with 0.65% gains against the Greenback while the Canadian dollar gained 0.57%. The gains in the commodity risk currencies came on a strong rally in Oil prices and Gold which was already trending stronger. The US Dollar opened the week on a positive week but soon eased back on the rally following the FOMC meeting minutes. Friday’s consumer inflation data posted strong numbers helping the dollar to stabilize. The Yen continued to trade firm across the board, indicating a slight hint of risk aversion still in play.

Weekly Spot FX Performance – 19/02/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 19/02/2016 (Source: Finviz.com)

The week ahead will see data from the US which includes the durable goods orders and the second estimate GDP data for the fourth quarter. From the Eurozone, data is limited to flash PMI’s and inflation numbers. The British Pound remains susceptible to the ongoing negotiation between the UK and its EU partners, as the currency turned weak on Friday despite strong retail sales numbers.

Fundamentals for the Week 22/02 – 19/02

Date Time Currency Detail Forecast Previous
22-Feb 00:10 AUD RBA Assist Gov Debelle Speaks
04:00 JPY Flash Manufacturing PMI 52 52.3
NZD Credit Card Spending y/y 7.40%
10:00 EUR French Flash Manufacturing PMI 49.9 50
EUR French Flash Services PMI 50.4 50.3
10:15 CHF PPI m/m -0.20% -0.40%
10:30 EUR German Flash Manufacturing PMI 52.1 52.3
EUR German Flash Services PMI 54.8 55
11:00 EUR Flash Manufacturing PMI 52.1 52.3
EUR Flash Services PMI 53.4 53.6
13:00 GBP CBI Industrial Order Expectations -12 -15
16:45 USD Flash Manufacturing PMI 52.5 52.4
17:30 AUD CB Leading Index m/m 0.30%
23-Feb 09:00 EUR German Final GDP q/q 0.30% 0.30%
11:00 EUR German Ifo Business Climate 107 107.3
13:15 CHF SNB Chairman Jordan Speaks
USD S&P/CS Composite-20 HPI y/y 5.60% 5.80%
17:00 USD CB Consumer Confidence 97.6 98.1
USD Existing Home Sales 5.42M 5.46M
USD Richmond Manufacturing Index 2 2
24-Feb 01:50 JPY SPPI y/y 0.30% 0.40%
02:30 AUD Construction Work Done q/q -2.10% -3.60%
AUD Wage Price Index q/q 0.60% 0.60%
13:00 GBP CBI Realized Sales 16 16
16:45 USD Flash Services PMI 53.6 53.2
17:00 USD New Home Sales 522K 544K
17:30 USD Crude Oil Inventories 2.1M
19:50 CAD Gov Council Member Schembri Speaks
23:45 NZD Visitor Arrivals m/m -1.30%
25-Feb 02:00 USD FOMC Member Bullard Speaks
02:30 AUD Private Capital Expenditure q/q -3.00% -9.20%
09:00 EUR GfK German Consumer Climate 9.2 9.4
EUR Private Loans y/y 1.50% 1.40%
11:30 GBP Second Estimate GDP q/q 0.50% 0.50%
GBP Prelim Business Investment q/q 0.60% 2.20%
GBP Index of Services 3m/3m 0.70% 0.60%
12:00 EUR Final CPI y/y 0.40% 0.40%
EUR Final Core CPI y/y 1.00% 1.00%
EUR Italian Retail Sales m/m 0.50% 0.30%
15:30 CAD Corporate Profits q/q -5.40%
USD Core Durable Goods Orders m/m 0.10% -1.00%
USD Unemployment Claims 271K 262K
USD Durable Goods Orders m/m 2.60% -5.00%
16:00 USD HPI m/m 0.50% 0.50%
26-Feb 07:00 JPY BOJ Core CPI y/y 1.20% 1.30%
All Day EUR German Prelim CPI m/m 0.60% -0.80%
09:45 EUR French Consumer Spending m/m 0.60% 0.70%
10:00 EUR Spanish Flash CPI y/y -0.50% -0.30%
15:30 USD Prelim GDP q/q 0.50% 0.70%
USD Core PCE Price Index m/m 0.10% 0.00%
USD Goods Trade Balance -61.1B -61.5B
USD Personal Spending m/m 0.30% 0.00%
USD Personal Income m/m 0.40% 0.30%
USD Prelim GDP Price Index q/q 0.80% 0.80%
17:00 USD Revised UoM Consumer Sentiment 91.1 90.7
USD Revised UoM Inflation Expectations 2.50%

Time: GMT+2

Currencies/Events to Watch this Week

AUD: Economic data from Australia this week is limited with data mostly on construction work done and the quarterly wage price index. The Aussie is likely to remain muted for the most part of the week, following last week’s comments from RBA economist who noted the downside risks to the AUD and that $0.65 was a more preferred exchange rate for the Australian Dollar.

JPY: The focus for the Yen this week will be the Bank of Japan’s inflation data. Expectations are for the core CPI to rise at a slower pace of 1.20%. The BoJ has a target inflation rate of 2.0% and is under pressure to do more to stoke inflation. In January, the BoJ cut interest rates to the negative which had little to no effect as far as the Yen’s exchange rate was concerned. Another weak reading in inflation combined with a contraction in the fourth quarter of 2015 could clearly put the BoJ officials on the edge.

EUR: The week ahead is marked with flash PMI data but more importantly, focus turns to the Eurozone inflation numbers. Taking a cue from inflation data across other economies, there is a possibility that Eurozone inflation might have either risen strongly or stayed flat/unchanged. The Euro is likely to remain flat for the most part of the week, taking a cue mostly from the US Dollar.

GBP: The UK’s second estimates for the fourth quarter GDP is due this week with expectations staying flat at 0.50%. However, more importantly the British Pound comes at risk as EU and UK leaders negotiate a deal in order for the UK to remain in the EU. On Friday, the Pound fell sharply as negotiations continued with no clear break through.

CHF: The Swiss Franc comes under risk this week as SNB Chairman; Thomas Jordan is due to speak. The SNB has not ruled out further rate cuts and it is likely that the SNB would prefer to wait and watch on how the ECB decides in March. Regardless, dovish comments from the SNB Chairman could pose a significant risk to the CHF crosses this week.

USD: Data from the US this week includes the existing and new home sales data. However, focus will likely be on the durable goods orders numbers followed by the second revision to the fourth quarter GDP, which is estimated to be weaker at 0.50% against initial estimates of 0.70%. While the markets are tuned in for a weak GDP release, any surprise to the estimates could reflect into the US Dollar’s direction in the near term.

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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.