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

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Forex Afternoon

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.

Weekly Spot FX Performance – 11/03/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 11/03/2016 (Source: Finviz.com)

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.

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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.