Weekly Forex Preview: Inflation and China GDP

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The Japanese yen was the strongest currency last week, rallying over 3.29% across the board. The gains in the yen came about as investors continued to shift bets to the safe haven asset. However, Gold prices did not see much of gains in similar terms. While the BoJ is put in a tight spot on the recent strengthening of the yen, officials fell short of verbally talking down the currency. The Swiss franc also posted some decent gains but mild in comparison to the yen. Oil prices posted a strong rally on Friday erasing the losses from the previous week. This led the Canadian dollar to bounce back strongly as well as economic data on Friday saw a strong jobs report with the Canadian unemployment rate falling to 7.10% from 7.30% previously.

Weekly Spot FX Performance – 08/04/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 08/04/2016 (Source: Finviz.com)

On the weaker side, the Australian dollar lost nearly 1.64% for the week. This came as the RBA initially made mention of the appreciation of the AUD, which started the Aussie’s descent. While the AUDUSD managed to trim the losses and rally back following the dovish FOMC minutes, the risk-off the sentiment on Friday hit the AUD and the Kiwi hard sending both the commodity-linked currencies lower.

Fundamentals for the Week 11/04 – 15/04

Date Time Currency Event Forecast Previous
11-Apr  2:30 CNY CPI y/y 2.40% 2.30%
CNY PPI y/y -4.60% -4.90%
12-Apr 09:30 GBP CPI y/y 0.30% 0.30%
GBP PPI Input m/m 2.10% 0.10%
GBP RPI y/y 1.50% 1.30%
13:30 USD Import Prices m/m 1.10% -0.30%
13-Apr Tentative CNY Trade Balance 203B 210B
09:30 GBP BOE Credit Conditions Survey
13:30 USD Core Retail Sales m/m 0.40% -0.10%
USD PPI m/m 0.30% -0.20%
USD Retail Sales m/m 0.10% -0.10%
USD Core PPI m/m 0.10% 0.00%
15:00 CAD BOC Monetary Policy Report
CAD BOC Rate Statement
CAD Overnight Rate 0.50% 0.50%
16:15 CAD BOC Press Conference
14-Apr 02:30 AUD Employment Change 18.6K 0.3K
AUD Unemployment Rate 5.90% 5.80%
08:15 CHF PPI m/m -0.20% -0.60%
10:00 EUR Final CPI y/y -0.10% -0.10%
12:00 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
13:30 CAD NHPI m/m 0.20% 0.10%
USD CPI m/m 0.20% -0.20%
USD Core CPI m/m 0.20% 0.30%
USD Unemployment Claims 270K 267K
15:00 USD FOMC Member Powell Speaks
15-Apr 02:30 AUD RBA Financial Stability Review
03:00 CNY GDP q/y 6.70% 6.80%
CNY Industrial Production y/y 6.00% 5.40%
CNY Fixed Asset Investment ytd/y 10.40% 10.20%
CNY NBS Press Conference
13:30 CAD Manufacturing Sales m/m -1.50% 2.30%
USD Empire State Manufacturing Index 2.1 0.6
14:15 USD Capacity Utilization Rate 75.40% 76.70%
USD Industrial Production m/m -0.10% -0.50%
15:00 USD Prelim UoM Consumer Sentiment 92.3 91

Time: GMT

Currencies/Events to Watch this Week

AUD: Economic data from Australia for the week ahead is limited to the monthly jobs report. Analysts expect to see Australia’s unemployment rate rise from 5.80% to 5.90% in March while the monthly employment change is expected to rise 18.6k. With the unemployment rate forecasts dovish, a surprise could see the Australian dollar make significant gains.

CNY: It will be a busy week for China starting with the inflation data. Expectations are bullish with forecasts of 2.40% up from 2.30% previously while producer price index is expected to improve from -4.90% to -4.60%. China’s trade balance numbers are also due followed by the GDP report. Expectations are for a soft print of 6.70% in the first three months of the year, down from 6.80% previously. China’s industrial production is also expected to rise to 6.0%, up from 5.40%.

EUR: Data from the Eurozone will see the inflation numbers from Germany and the Eurozone. German final CPI is expected to be confirmed at 0.80% while French CPI is expected to be at 0.70%. For the Eurozone, the headline CPI is expected to fall 0.10% while core CPI is expected to remain unchanged at 1.0%.

GBP: It will be a busy week for the UK with the CPI data expected to show an increase of 0.30%, same as the previous month. The core CPI is also expected to rise 1.30%, following the previous month’s 1.20%. The Bank of England will be meeting over the week, but no changes are expected during this week’s event.

JPY: Data from Japan over the week includes the core machinery orders data which is expected to show a contraction of 11.80%, down from the previous period’s increase of 15.0%. Industrial production data is also expected to remain weak, posting a contraction of 6.20%.

CAD: The Bank of Canada will be meeting on Wednesday with the key lending rates expected to remain steady at 0.50%. The remainder of the week is very quiet with manufacturing sales data due out on Friday. Forecasts call for a 1.50% dip in manufacturing sales is expected after a previous period’s strong increase of 2.30%.

USD: While the week starts off on a quiet note for the US data, from Wednesday the economic calendar gets busy starting with retail sales and business inventories. On Thursday, consumer inflation data is due for release with expectations of a 0.20% increase in both the headline and the core CPI. Fed members continue their speeches over the week including FOMC members, Powell, Dudley, and Kaplan


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