Week ahead in Fx: Yellen speech, RBA and RBNZ

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The US dollar was one the weakest currency last week, despite the dollar starting off on a firm footing on Monday. The dollar weakened sharply after Friday’s jobs report came out worse than expected to leave many to question whether the Fed will hike rates in June. This sent the US dollar to close Friday’s session at a 3-week low. The Pound Sterling also closed the week on a bearish note. Although this week was devoid of any Brexit opinion poll related news, the fundamentals were at play with the May PMI numbers coming out weaker than expected and clearly indicating that businesses were being impacted by the EU membership referendum uncertainty.

Weekly Spot FX Performance – 03/06/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 03/06/2016 (Source: Finviz.com)

Among the commodity-linked currencies, the Kiwi was the top performer last week rising 3.91%, while the Aussie managed to rise 2.53% against the US dollar. The yen was also stronger this week, rising 3.43% gaining as some BoJ officials spoke out against the central bank’s policies.

Fundamentals for the Week 06/06 – 10/06

Date Time Currency Detail Forecast Previous
06-Jun 07:00 EUR German Factory Orders m/m -0.40% 1.90%
09:10 EUR Retail PMI 47.9
09:30 EUR Sentix Investor Confidence 7.1 6.2
17:30 USD Fed Chair Yellen Speaks
07-Jun 05:30 AUD Cash Rate 1.75% 1.75%
AUD RBA Rate Statement
06:00 JPY Leading Indicators 100.80% 99.30%
07:00 EUR German Industrial Production m/m 0.80% -1.30%
EUR French Trade Balance -4.2B -4.4B
10:00 EUR Revised GDP q/q 0.50% 0.50%
13:30 USD Revised Nonfarm Productivity q/q -0.60% -1.00%
USD Revised Unit Labor Costs q/q 4.00% 4.10%
15:00 CAD Ivey PMI 54.2 53.1
USD IBD/TIPP Economic Optimism 49.1 48.7
20:00 USD Consumer Credit m/m 19.1B 29.7B
23:45 NZD Manufacturing Sales q/q -1.90%
08-Jun 00:50 JPY Current Account 2.04T 1.89T
JPY Final GDP q/q 0.50% 0.40%
JPY Bank Lending y/y 2.20%
JPY Final GDP Price Index y/y 0.90% 0.90%
02:30 AUD Home Loans m/m 2.60% -0.90%
Tentative CNY Trade Balance 358B 298B
Tentative CNY USD-Denominated Trade Balance 55.8B 45.6B
06:00 JPY Economy Watchers Sentiment 43.4 43.5
08:15 CHF CPI m/m 0.20% 0.30%
09:30 GBP Manufacturing Production m/m 0.10% 0.10%
GBP Industrial Production m/m 0.00% 0.30%
13:15 CAD Housing Starts 194K 192K
13:30 CAD Building Permits m/m -7.00%
22:00 NZD Official Cash Rate 2.00% 2.25%
NZD RBNZ Rate Statement
NZD RBNZ Monetary Policy Statement
09-Jun 00:00 NZD RBNZ Press Conference
00:50 JPY Core Machinery Orders m/m -3.20% 5.50%
JPY M2 Money Stock y/y 3.30% 3.30%
02:10 NZD RBNZ Gov Wheeler Speaks
02:30 CNY CPI y/y 2.30% 2.30%
CNY PPI y/y -3.10% -3.40%
06:30 EUR French Final Non-Farm Payrolls q/q 0.20% 0.20%
06:45 CHF Unemployment Rate 3.50% 3.50%
07:00 EUR German Trade Balance 21.4B 23.6B
JPY Prelim Machine Tool Orders y/y -26.30%
08:00 EUR ECB President Draghi Speaks
09:30 GBP Goods Trade Balance -11.1B -11.2B
13:30 CAD NHPI m/m 0.30% 0.20%
CAD Capacity Utilization Rate 81.50% 81.10%
USD Unemployment Claims 270K 267K
15:00 USD Wholesale Inventories m/m -0.10% 0.10%
15:30 CAD BOC Financial System Review
16:15 CAD BOC Gov Poloz Speaks
10-Jun 00:50 JPY PPI y/y -4.20% -4.20%
05:30 JPY Tertiary Industry Activity m/m 0.70% -0.70%
07:00 EUR German Final CPI m/m 0.30% 0.30%
EUR German WPI m/m 0.20% 0.30%
07:45 EUR French Industrial Production m/m 0.50% -0.30%
10th-15th CNY M2 Money Supply y/y 12.60% 12.80%
10th-15th CNY New Loans 750B 556B
09:00 EUR Italian Industrial Production m/m 0.30% 0.00%
09:30 GBP Construction Output m/m 1.50% -3.60%
GBP Consumer Inflation Expectations 1.80%
13:30 CAD Employment Change 1.1K -2.1K
CAD Unemployment Rate 7.10% 7.10%
15:00 USD Prelim UoM Consumer Sentiment 94.1 94.7
USD Prelim UoM Inflation Expectations 2.40%

Time: GMT+1

Currencies/Events to Watch this Week

AUD: The Australian central bank will be meeting on June 7th where expectations are that the central bank will be standing pat on policy, given the rate cut just last month in May. With an upbeat GDP in the first quarter, the RBA could maintain its accommodative stance but also re-iterate that it would be watching inflation expectations in the near term. Besides the RBA decision, consumer confidence from Westpac and home loans are other details to look forward to.

NZD: The Reserve Bank of New Zealand will be meeting for its monetary policy review on June 8th. While earlier expectations were for a rate cut, the changing economic landscape in New Zealand is now giving conviction that the RBNZ could hold off a rate cut at its meeting this week. The main premise behind this view is the fact that with higher oil prices and the New Zealand budget which is now expected to increase infrastructure spending, thus raising construction prices and excise duty on tobacco products all point to a potential increase in New Zealand inflation expectations. Holding off a rate hike at this week’s meeting will no doubt increase speculation for a rate cut in August.

JPY: Japan’s GDP will be once again in focus, but the final estimates are unlikely to point to any surprises. Japan’s first quarter GDP was recorded at 0.40% while the annualized GDP was recorded at 1.70%. With the BoJ’s meeting on the agenda the week later, the yen could be seen taking a back seat this week.

CNY: China will be released its export/import data alongside the trade balance numbers. Expectations are for exports to rise 1.70%, offsetting the previous month’s decline of 1.80%, while imports are expected to fall 7% following at 10.90% decline in May. Inflation numbers will be closed watched, due out on 9th June. In April, China’s annualized inflation was recorded at 2.30%, while producer price index was seen at -3.40%. Expectations for this week is for inflation to rise at a subdued pace of 2.20%, and PPI is expected to moderate its declines, falling 3.30%.

EUR: Data from the Eurozone this week will be limited to the first quarter final GDP report. No change is expected, confirming that the eurozone economy grew at a pace of 0.50% in the first quarter of this year while posting annualized GDP growth rate of 1.50%. German industrial production and factory orders are also due this week and expected to show some moderation following last month’s strong gains.

GBP: Data from the UK is relatively soft with only the industrial and manufacturing production numbers being the main event to watch for. Industrial production is expected to extend its declines, falling 0.20% for April, posting declines at the same pace as in March on a year over year basis. On a month over month basis, industrial production is expected to rise 0.20%. Manufacturing production is expected to remain flat on a month over month basis while showing a moderate decline of 1.20% on a year over year basis. Trade balance numbers are up on Thursday, June 9th.

CAD: A busy week for Canada starts from Tuesday’s Ivey PMI, which is expected to rise to 54.2 in May, up from April’s 53.1. Building permits and housing starts data will also be coming up this week. On Friday, Canada will be reporting its monthly labor market data. The unemployment rate is expected to hold steady at 7.10% while the net employment change in May is expected to rise a modest 0.9k.

USD: Fed Chair, Janet Yellen will be speaking at an event in Philadelphia on Monday and the markets will be watching her comments. Another FOMC voting member, Rosengren will also be speaking a few hours later. Data from the US this week is relatively quiet for the remainder of the week with only the weekly jobless claims and the UoM consumer confidence being the other major events to look forward to.

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