Weekly Forex Preview: It’s ECB time!

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The Australian dollar emerged as the top performing currency last week. The AUD made strong gains led by better than expected unemployment data which saw the Australian unemployment rate fall to 5.70%, the lowest jobless rate since September of 2013. Besides the AUD being bolstered by the domestic data, China’s economic data this week was also in line with estimates which helped support the AUD. By Friday’s close, AUDUSD was trading near a 9-month high. The Kiwi also followed suite, but the gains came mostly from an improved risk sentiment due to China’s data.

Weekly Spot FX Performance – 15/04/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 15/04/2016 (Source: Finviz.com)

Last week saw the safe haven currencies giving back their gains with the yen and the Swiss franc ending up as the weaker currencies, falling 0.64% and 1.48% respectively. The declines come after weeks of strong risk aversion sentiment which especially impacted the Japanese yen which remains as the top performing currency on a year to date basis.

Fundamentals for the Week 18/04 – 22/04

Date Time Currency Event Forecast Previous
18-Apr 13:30 CAD Foreign Securities Purchases 7.52B 13.51B
USD FOMC Member Dudley Speaks
19-Apr 02:30 AUD Monetary Policy Meeting Minutes
10:00 EUR German ZEW Economic Sentiment 8.2 4.3
EUR ZEW Economic Sentiment 13.9 10.6
13:30 USD Building Permits 1.20M 1.18M
USD Housing Starts 1.17M 1.18M
14:30 AUD RBA Gov Stevens Speaks
16:00 CAD BOC Gov Poloz Speaks
20-Apr 09:30 GBP Average Earnings Index 3m/y 2.10% 2.10%
GBP Claimant Count Change -11.9K -18.0K
GBP Unemployment Rate 5.10% 5.10%
13:30 CAD Wholesale Sales m/m 0.00%
15:00 USD Existing Home Sales 5.29M 5.08M
15:30 USD Crude Oil Inventories 6.6M
21-Apr 09:30 GBP Retail Sales m/m -0.20% -0.40%
GBP Public Sector Net Borrowing 5.6B 6.5B
12:45 EUR Minimum Bid Rate 0.00% 0.00%
13:30 EUR ECB Press Conference
USD Philly Fed Manufacturing Index 12.4
USD Unemployment Claims 265k 253K
22-Apr 08:00 EUR French Flash Manufacturing PMI 49.8 49.6
EUR French Flash Services PMI 50 49.9
08:30 EUR German Flash Manufacturing PMI 50.9 50.7
EUR German Flash Services PMI 55 55.1
09:00 EUR Flash Manufacturing PMI 51.7 51.6
EUR Flash Services PMI 53.2 53.1
13:30 CAD Core CPI m/m 0.40% 0.50%
CAD Core Retail Sales m/m -0.70% 1.20%
CAD CPI m/m 0.40% 0.20%
CAD Retail Sales m/m -0.70% 2.10%

Time: GMT

Currencies/Events to Watch this Week

AUD: Economic data from Australia this week is fairly limited to the RBA’s meeting minutes from earlier this month. The Reserve Bank of Australia had left interest rates unchanged but made a mention of the AUD’s exchange rate appreciation. With the Australian economy holding up fairly well, the RBA’s minutes are unlikely to see any big reaction in the currency markets.

EUR: It is a busy week for the Eurozone with flash PMI numbers due later in the week. However, the big event for the euro will be the ECB’s meeting on Thursday. No change to monetary policy or QE is expected at this meeting, but the euro stays vulnerable to any dovish rhetoric from ECB officials during the press conference.

GBP: From the UK, the monthly jobs report is expected to stay lackluster. Average earnings is expected to rise at the same pace as in February at 2.10% while the unemployment rate is expected to hold steady at 5.10%. Following the unemployment data, retail sales numbers from the UK is expected to show another weak month with forecasts of a 0.20% declines. However, there is scope for an upside surprise given that inflation managed to tick higher during the period.

JPY: It is a slow week for the Japanese yen with economic data limited to flash manufacturing PMI. However, risk sentiment will likely be the main driving force for the yen next week as investors watch if USDJPY will continue to push higher or resume its strong downtrend. While BoJ officials have taken turns to jawbone the yen, it has yielded little results. The BoJ will be meeting in the last week of April for its monetary policy meeting, so nothing substantial is expected until then.

CAD: While the Canadian dollar starts off with limited data in the first part of the week, Friday’s data dump will see retail sales and CPI figures coming out. Retail sales are expected to disappoint falling 0.70% on both the core and headline while inflation is expected to come out mixed with the core CPI estimated to have increased 0.40%, less than February’s 0.50% while headline CPI is expected to rise 0.40%, up from February’s 0.20%.

USD: For the US dollar, data is limited this week to housing starts which are expected to stay soft at 1.17 million following the previous print of 1.18 million. Building permits, on the other hand, is expected to rise 1.20 million, up from 1.18 million previously. Fed member William Dudley will be speaking on Monday while for the remainder of the week, the Philly Fed manufacturing index and weekly jobless claims will be due for release.

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