Week ahead in FX: Inflation, FOMC & G7 Meetings

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The US dollar emerged on the top of the charts this week supported largely by the verbal intervention threats from Japan. The dollar got a boost by Friday as retail sales posted the biggest monthly jump which helped the dollar to make strong gains on the day. The Canadian dollar was the close next which was supported mostly by Oil prices.

Weekly Spot FX Performance – 13/05/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 13/05/2016 (Source: Finviz.com)

The yen was of course the weakest currency this week only next to the Australian dollar which continued to weaken as sentiment in the Australia dollar soured with markets pushing prices lower in anticipation of more rate cuts from the RBA later in the year.

Fundamentals for the Week 16/05 – 20/05

Date Time Currency Detail Forecast Previous
16-May 00:01 GBP Rightmove HPI m/m 1.30%
00:50 JPY PPI y/y -3.70% -3.80%
07:00 JPY Prelim Machine Tool Orders y/y -21.20%
13:30 USD Empire State Manufacturing Index 7.2 9.6
15:00 USD NAHB Housing Market Index 59 58
15:30 CAD BOC Review
17-May 02:30 AUD Monetary Policy Meeting Minutes
04:00 NZD Inflation Expectations q/q 1.60%
05:30 JPY Revised Industrial Production m/m 3.60% 3.60%
08:15 CHF PPI m/m 0.10% 0.00%
09:30 GBP CPI y/y 0.50% 0.50%
GBP PPI Input m/m 1.10% 2.00%
GBP RPI y/y 1.60% 1.60%
GBP Core CPI y/y 1.50% 1.50%
GBP HPI y/y 7.90% 7.60%
GBP PPI Output m/m 0.20% 0.30%
10:00 EUR Trade Balance 23.1B 20.2B
13:30 CAD Manufacturing Sales m/m -0.70% -3.30%
USD Building Permits 1.13M 1.09M
USD CPI m/m 0.40% 0.10%
USD Core CPI m/m 0.20% 0.10%
USD Housing Starts 1.12M 1.09M
14:15 USD Capacity Utilization Rate 75.10% 74.80%
USD Industrial Production m/m 0.30% -0.60%
23:45 NZD PPI Input q/q 0.30% -1.20%
NZD PPI Output q/q 0.40% -0.80%
18-May 00:50 JPY Prelim GDP q/q 0.10% -0.30%
JPY Prelim GDP Price Index y/y 1.00% 1.50%
01:30 AUD MI Leading Index m/m -0.10%
02:00 AUD RBA Assist Gov Debelle Speaks
02:30 AUD Wage Price Index q/q 0.50% 0.50%
09:30 GBP Average Earnings Index 3m/y 1.70% 1.80%
GBP Claimant Count Change 4.1K 6.7K
GBP Unemployment Rate 5.10% 5.10%
10:00 EUR Final CPI y/y -0.20% -0.20%
EUR Final Core CPI y/y 0.70% 0.80%
15:30 USD Crude Oil Inventories -3.4M
19:00 USD FOMC Meeting Minutes
19-May 00:50 JPY Core Machinery Orders m/m -1.90% -9.20%
02:30 AUD Employment Change 12.3K 26.1K
AUD Unemployment Rate 5.80% 5.70%
05:30 JPY All Industries Activity m/m 0.70% -1.20%
09:00 EUR Current Account 19.6B 19.0B
09:30 GBP Retail Sales m/m 0.70% -1.30%
12:30 EUR ECB Monetary Policy Meeting Accounts
13:30 CAD Wholesale Sales m/m 0.50% -2.20%
USD Philly Fed Manufacturing Index 3.2 -1.6
USD Unemployment Claims 276K 294K
20-May 07:00 EUR German PPI m/m 0.20% 0.00%
All Day ALL G7 Meetings
13:30 CAD Core CPI m/m 0.20% 0.70%
CAD Core Retail Sales m/m -0.40% 0.20%
CAD CPI m/m 0.40% 0.60%
CAD Retail Sales m/m -0.70% 0.40%
14:00 USD FOMC Member Tarullo Speaks
15:00 USD Existing Home Sales 5.39M 5.33M

Time: GMT+1

Currencies/Events to Watch this Week

AUD: The RBA’s monetary policy meeting will kick off the week from Tuesday. The meeting minutes might be important in light of the 25bps rate cut in early May. Later in the week, the monthly employment report from Australia is expected to show net monthly job gains of 12.3k, lower than the previous month’s 26.1k gains. The Australian unemployment rate is expected to tick higher to 5.80% from 5.70%. A beat on the estimates could, however, stem the declines in the Australian dollar, which has been steadily declining since the weak quarterly inflation and the RBA rate cut that followed.

NZD: Not much of data is due from New Zealand this coming week with inflation expectations for the quarter being the main data to watch for. Previously, quarterly inflation expectations were at 1.60%, falling from 1.90% prior. Quarterly producer prices are also expected to come out later on Tuesday, which is expected to rise 0.30% slower than the previous quarter’s 1.20% declines.

JPY: Preliminary GDP data will be dominating the news next week with expectations that the first quarter GDP in Japan was improved at 0.10% growth compared to 0.30% declines previously. The bullish estimates come in the backdrop of a better than expected trade balance data from Japan last week. The G7 meetings will also be important as Japanese officials continue to talk down the yen, in conflict with the US.

EUR: Data from Eurozone is fairly limited next week with the exception of the final CPI estimates. Expectations call for inflation to have fallen 0.20% on a yearly basis while core CPI is also expected to rise at a slower pace of 0.70%, down from 0.80% previously.

GBP: A busy week for the British pound data includes inflation numbers on Tuesday, which is expected to show a 0.50% increase yearly while core inflation is expected to remain unchanged at 1.50%. Following the inflation data, the monthly jobs report is due on Wednesday which is expected to show the unemployment rate staying unchanged at 5.10%. Average earnings are expected to rise at a slower pace of 1.70% compared to 1.80% previously. On Thursday, retail sales numbers from the UK is expected to moderate, rising 0.70% in April following March’s 1.30% declines.

CAD: Data from Canada over the week starts with manufacturing sales which is expected to fall 0.70% extending the 3.30% declines from the prior month. Inflation data is due on Friday and is expected to show a 0.40% increase, slower than the previous month’s 0.60% increase while core CPI is expected to rise 0.20% compared to 0.70% previously. Retail sales will also be released and is expected to show a contraction of 0.70% for the month.

USD: Data from the US will focus on Tuesday’s inflation report. Expectations call for a modest rebound with US inflation expected to rise 0.40% to the headline and 0.20% on the core. On Wednesday, FOMC meeting minutes will be out and is expected to bring some volatility to the markets.

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