Weekly Forex Preview: What will the BoJ and Fed do?

Last week saw the Australian dollar post strong gains, rising 1.74%. The gains came about as the AUDUSD closed a second week with strong gains. Overall, the Aussie is up nearly 10% since the start of 2016 trading near the 0.755 handle. The Kiwi was the weakest as the RBNZ’s surprise rate cut sent the currency to close lower for the week. However, by Friday, NZDUSD was seen recovering most of those losses. The Euro, which initially as trading weaker also managed to trim its declines and in fact closed the week on a stronger note, gaining close to 1.30% for the week against the US Dollar. The Euro gained despite the ECB cutting rates and expanding its QE purchases.

The US Dollar and the Yen were the weakest as the Federal Reserve and the BoJ are due to meet next week.

Fundamentals for the Week 14/03 – 18/03

Date	Time	Currency	Detail	Forecast	Previous
14-Mar	01:50	JPY	Core Machinery Orders m/m	2.00%	4.20%
	12:00	EUR	Industrial Production m/m	1.70%	-1.00%
	21:00	NZD	RBNZ Gov Wheeler Speaks
15-Mar	02:30	AUD	Monetary Policy Meeting Minutes
		AUD	New Motor Vehicle Sales m/m		0.50%
	Tentative	JPY	Monetary Policy Statement
	06:30	JPY	Revised Industrial Production m/m	3.70%	3.70%
		JPY	Tertiary Industry Activity m/m	0.40%	-0.60%
	Tentative	JPY	BOJ Press Conference
	09:45	EUR	French Final CPI m/m	0.20%	0.20%
	12:00	EUR	Employment Change q/q	0.20%	0.30%
	14:30	USD	Core Retail Sales m/m	-0.20%	0.10%
		USD	PPI m/m	-0.10%	0.10%
		USD	Retail Sales m/m	-0.10%	0.20%
		USD	Core PPI m/m	0.10%	0.40%
		USD	Empire State Manufacturing Index	-10.1	-16.6
	16:00	USD	Business Inventories m/m	0.00%	0.10%
		USD	NAHB Housing Market Index	59	58
	Tentative	NZD	GDT Price Index		1.40%
	22:00	USD	TIC Long-Term Purchases		-29.4B
	23:45	NZD	Current Account	-2.90B	-4.75B
16-Mar	01:30	AUD	MI Leading Index m/m		0.00%
	11:30	GBP	Average Earnings Index 3m/y	2.00%	1.90%
		GBP	Claimant Count Change	-9.0K	-14.8K
		GBP	Unemployment Rate	5.10%	5.10%
	Tentative	EUR	German 10-y Bond Auction		0.26|1.2
	14:30	CAD	Manufacturing Sales m/m		1.20%
		CAD	Foreign Securities Purchases		-1.41B
		GBP	Annual Budget Release
		USD	Building Permits	1.20M	1.20M
		USD	CPI m/m	-0.20%	0.00%
		USD	Core CPI m/m	0.10%	0.30%
		USD	Housing Starts	1.15M	1.10M
	15:15	USD	Capacity Utilization Rate	77.00%	77.10%
		USD	Industrial Production m/m	-0.10%	0.90%
	15:30	GBP	CB Leading Index m/m		0.40%
	16:30	USD	Crude Oil Inventories		3.9M
	20:00	USD	FOMC Economic Projections
		USD	FOMC Statement
		USD	Federal Funds Rate	<0.50%	<0.50%
	20:30	USD	FOMC Press Conference
	23:45	NZD	GDP q/q	0.70%	0.90%
17-Mar	00:05	AUD	RBA Assist Gov Debelle Speaks
	01:50	JPY	Trade Balance	0.24T	0.12T
	02:30	AUD	Employment Change	12.3K	-7.9K
		AUD	Unemployment Rate	6.00%	6.00%
		AUD	RBA Bulletin
	08:45	CHF	SECO Economic Forecasts
	10:15	CHF	PPI m/m	0.20%	-0.40%
	10:30	CHF	Libor Rate	-0.75%	-0.75%
		CHF	SNB Monetary Policy Assessment
	11:00	EUR	Italian Trade Balance	4.33B	6.02B
	12:00	EUR	Final CPI y/y	-0.20%	-0.20%
		EUR	Final Core CPI y/y	0.70%	0.70%
		EUR	Trade Balance	20.2B	21.0B
	Tentative	EUR	Spanish 10-y Bond Auction
	14:00	GBP	MPC Official Bank Rate Votes	0-0-9	0-0-9
		GBP	Monetary Policy Summary
		GBP	Official Bank Rate	0.50%	0.50%
		GBP	Asset Purchase Facility	375B	375B
		GBP	MPC Asset Purchase Facility Votes	0-0-9	0-0-9
	14:30	CAD	Wholesale Sales m/m		2.00%
		USD	Philly Fed Manufacturing Index	-1.1	-2.8
		USD	Unemployment Claims	267K	259K
		USD	Current Account	-115B	-124B
	16:00	USD	JOLTS Job Openings	5.60M	5.61M
		USD	CB Leading Index m/m	0.20%	-0.20%
	16:30	USD	Natural Gas Storage
18-Mar	01:50	JPY	Monetary Policy Meeting Minutes
	09:00	EUR	German PPI m/m	-0.20%	-0.70%
	14:00	GBP	BOE Quarterly Bulletin
	14:30	CAD	Core CPI m/m	0.50%	0.30%
		CAD	Core Retail Sales m/m	0.70%	-1.60%
		CAD	CPI m/m	0.20%	0.20%
		CAD	Retail Sales m/m	0.80%	-2.20%
	15:00	USD	FOMC Member Dudley Speaks
	17:00	USD	Prelim UoM Consumer Sentiment	92.3	91.7
		USD	FOMC Member Rosengren Speaks
		USD	Prelim UoM Inflation Expectations		2.50%
	20:00	USD	FOMC Member Bullard Speaks

Time: GMT+2

Currencies/Events to Watch this Week

AUD: The monetary policy meeting minutes will be due on Tuesday but the release is not expected to impact the Aussie dollar a lot, given the RBA’s rather neutral stand. On Thursday, the Australian employment data will be released. On a monthly basis, the economy is expected to have added 12.3k jobs, following a decline -7.9k previously. Australian unemployment rate is expected to remain unchanged at 6.0%. The RBA will also be releasing its monetary policy bulletin.

NZD: The week ahead will see a speech from RBNZ Governor Wheeler late Monday. Global dairy price index numbers are due on Tuesday followed by the New Zealand quarterly GDP numbers for Q4 of 2015. Forecasts call for a slower pace of increase of 0.70%, down from 0.90% previously. With the RBNZ cutting rates last week and noting that further rate cuts are possible, weaker growth could likely raise speculation of further RBNZ action over the coming months.

JPY: The Bank of Japan’s monetary policy meeting is due next week on Tuesday and it will be followed up by a press conference from the BoJ. It is widely expected that the BoJ will not cut rates further following its January’s surprise rate cut. However, options are open for potential expansion to the BoJ’s QQE. The USDJPY has remained flat for the most part last week and could remain so into the event with a potential for a breakout and establishing direction.

EUR: Following the ECB’s event last week data for the week ahead is limited to inflation numbers. French final CPI data is due on Tuesday with expectations that consumer prices grew at a pace of 0.20%, unchanged from the previous month. Eurozone quarterly employment change is also expected to show an increase of 0.20% from the previous quarter. Eurozone final CPI year over year is expected to fall -0.20% while the core CPI is expected to remain unchanged at 0.70%. The data is due on Thursday. Winding up the week will be the German producer prices index which is expected to show a decline of -0.20%. The Euro is likely to take a back seat as the Fed’s meeting looms.

GBP: It will be a busy week for the Pound Sterling. On Wednesday, unemployment numbers are due with the average earnings index expected to rise 2.0% following 1.90% growth seen in January. The unemployment rate is expected to remain unchanged at 5.10%. The UK will also be releasing its annual budget later in the day. Thursday, the Bank of England’s monetary policy is likely to remain a non-event with rates remaining at 0.50% while the MPC vote count is also expected to see no dissenters voting for rate hikes.

CHF: The Swiss National Bank holds its quarterly monetary policy meeting this week. Expectations are strongly in favor of the SNB keeping the Libor rates unchanged at -0.75%. Few weeks ago SNB Chairman Thomas Jordan noted that the negative interest rates have a limited impact implying that the SNB could hold rates steady without further rate cuts. On the exchange rate, expect the usual rhetoric from the SNB calling the Swiss Franc overvalued.

CAD: Data from Canada will see the manufacturing sales and foreign securities purchases due on Wednesday. More importantly, consumer inflation and retail sales figures will be released on Friday. Expectations are that consumer inflation increased 0.50% in February, up from 0.30% increase in January on the core while the headline inflation is expected to remain unchanged at 0.20%. Retail sales numbers are forecasted to rise 0.70% on the core and 0.80% on the headline number.

USD: It will be a busy week for the US Dollar with retail sales and consumer inflation numbers coming out earlier in the week. Retail sales expectations are dovish while consumer inflation is expected to fall -0.20% for the month on the headline and rise a meager 0.10% on the core for the month. The big event for the US Dollar will of course be the FOMC meeting on Wednesday. Rates are expected to remain unchanged and the Fed will be holding a press conference and also releasing its new economic forecasts. Expect to see volatility into the event.