FX Week Ahead: RBNZ Rate Cuts, US Retail Sales

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The US dollar managed to recover last week with most of the gains being attributed to last Friday’s payrolls report which managed to revive the dollar bulls. Still, the Japanese yen was the strongest currency last week, gaining 0.52% against the US dollar and emerging as the strongest currency overall. This was followed by the Australian dollar interestingly. Despite an interest rate cut by the RBA and the fact that the central bank expects inflation to remain low at the current levels the Australian dollar was trading stronger across the board.

Weekly Spot FX Performance – 05/08/2016
Weekly Spot FX Performance – 05/08/2016

On the weaker side, the British pound was seen closing the week 1.13% lower, but the Swiss franc was the weakest, down 1.180% on the week. The Canadian dollar was also one of the weaker currencies after Friday’s jobs report proved to be disappointing and Oil prices touching lows of $40 last week. Gold prices also closed weaker, down 0.97% after posting strong gains the week before.

Economic Calendar for the Week 08/08 – 12/08

Date Time Currency Event Forecast Previous
08-Aug  0:50 JPY Current Account 1.60T 1.41T
JPY BOJ Summary of Opinions
JPY Bank Lending y/y 2.00%
Tentative CNY Trade Balance 313B 311B
Tentative CNY USD-Denominated Trade Balance 47.6B 48.1B
06:00 JPY Economy Watchers Sentiment 42.6 41.2
07:00 EUR German Industrial Production m/m 0.90% -1.30%
08:15 CHF CPI m/m -0.50% 0.10%
09:30 EUR Sentix Investor Confidence 3.6 1.7
13:30 CAD Building Permits m/m 2.70% -1.90%
15:00 USD Labor Market Conditions Index m/m -1.9
09-Aug 00:50 JPY M2 Money Stock y/y 3.30% 3.40%
CNY CPI y/y 1.70% 1.90%
CNY PPI y/y -2.00% -2.60%
06:45 CHF Unemployment Rate 3.30% 3.30%
07:00 EUR German Trade Balance 23.2B 22.2B
JPY Prelim Machine Tool Orders y/y -19.90%
09:30 GBP Manufacturing Production m/m 0.00% -0.50%
GBP Goods Trade Balance -9.6B -9.9B
GBP Industrial Production m/m -0.10% -0.50%
11:00 USD NFIB Small Business Index 94.5 94.5
13:15 CAD Housing Starts 196K 218K
13:30 USD Prelim Nonfarm Productivity q/q 0.50% -0.60%
USD Prelim Unit Labor Costs q/q 1.80% 4.50%
15:00 GBP NIESR GDP Estimate 0.60%
USD IBD/TIPP Economic Optimism 46.2 45.5
USD Wholesale Inventories m/m 0.00% 0.10%
10-Aug 00:50 JPY Core Machinery Orders m/m 3.40% -1.40%
JPY PPI y/y -4.00% -4.20%
02:30 AUD Home Loans m/m 2.40% -1.00%
04:05 AUD RBA Gov Stevens Speaks
05:30 JPY Tertiary Industry Activity m/m 0.30% -0.70%
07:45 EUR French Industrial Production m/m 0.30% -0.50%
22:00 NZD Official Cash Rate 2.00% 2.25%
NZD RBNZ Rate Statement
NZD RBNZ Monetary Policy Statement
22:05 NZD RBNZ Press Conference
11-Aug 02:00 AUD MI Inflation Expectations 3.70%
07:45 EUR French Final CPI m/m -0.40% -0.40%
11th-16th CNY M2 Money Supply y/y 11.10% 11.80%
11th-16th CNY New Loans 900B 1380B
13:30 CAD NHPI m/m 0.20% 0.70%
USD Unemployment Claims 272K 269K
USD Import Prices m/m -0.20% 0.20%
23:30 NZD Business NZ Manufacturing Index 57.7
23:45 NZD Retail Sales q/q 1.00% 0.80%
NZD Core Retail Sales q/q 1.10% 1.00%
12-Aug 03:00 CNY Industrial Production y/y 6.20% 6.20%
CNY Fixed Asset Investment ytd/y 8.90% 9.00%
CNY Retail Sales y/y 10.50% 10.60%
07:00 EUR German Prelim GDP q/q 0.30% 0.70%
EUR German Final CPI m/m 0.30% 0.30%
EUR German WPI m/m 0.30% 0.60%
07:45 EUR French Prelim Non-Farm Payrolls q/q 0.20% 0.30%
09:00 EUR Italian Prelim GDP q/q 0.20% 0.30%
09:30 GBP Construction Output m/m 0.90% -2.10%
10:00 EUR Flash GDP q/q 0.30% 0.30%
EUR Industrial Production m/m 0.60% -1.20%
13:30 USD Core Retail Sales m/m 0.20% 0.70%
USD PPI m/m 0.10% 0.50%
USD Retail Sales m/m 0.40% 0.60%
USD Core PPI m/m 0.20% 0.40%
15:00 USD Prelim UoM Consumer Sentiment 91.5 90
USD Business Inventories m/m 0.10% 0.20%
USD Prelim UoM Inflation Expectations 2.70%

Time: GMT+1

Currencies/Events to Watch this Week

AUD: After last week’s rate cut and inflation outlook failed to change the status quo in the AUD, the week ahead is relatively soft with no major events scheduled, save for the RBA Gov. Steven’s speech. The Aussie dollar is, therefore, more likely to take its cues from the strength of the US dollar and the general market sentiment. Home loans are expected to rise 2.40% in June following a 1.0% decline the month before.

NZD: The Reserve Bank of New Zealand will be the main focus next week as the central bank is expected to cut the official cash rate by 25bps. Following the weak inflation outlook from the RBNZ a few weeks ago, the expectation for a rate cut has been priced in already. The NZD could, therefore, be at risk of the RBNZ’s forward guidance. Many economists expect the RBNZ to eventually lower the OCR rate to 1.75% by the end of 2016. On Thursday, retail sales will be on the tap and is expected to show a 1.0% increase in the second quarter, following a slower than expected increase of 0.80% in the first quarter.

JPY: Japan is likely to stay on the sidelines this week with no major events coming out. The economy watchers sentiment is expected to improve to 42.6 from 41.2 while the machinery orders and industry activity make up the remainder of the events. Watch for PPI from Japan which is forecast to fall 4.0%, less than the previous print of a 4.20% decline.

EUR: In the eurozone, the focus will be on industrial production numbers. In Germany, industrial production is expected to reverse May’s decline of 1.30% with the median consensus showing a 0.90% expected increase. Overall, the industrial production data in the Eurozone is expected to show a positive reversal in June. Preliminary GDP numbers will also be released over the week, with Germany’s GDP expected to slow to 0.30% in the second quarter, while the Eurozone’s GDP is expected to remain unchanged at 0.30%.

GBP: Still reeling from the BoE rate cuts and asset purchase increases, the GBP will be looking to the manufacturing and industrial production numbers. Estimates show no change to manufacturing production on a month over month basis, while industrial production is expected to decrease 0.10%. The data still covers the most part of June which is, therefore, unlikely to impact the British pound. NIESR will be releasing the GDP estimates.

CAD: A slow week in Canada, building permits, and housing starts are the only two events coming out over the week. Building permits are expected to rise 2.70% in June following the 1.90 declines the month before, while housing starts are expected to rise 196k, down from 218k seen earlier.

USD: The economic calendar from the US is slow for the first part of the week. The only big events to look at over next week are the data from Friday which covers retail sales and PPI for July. Retail sales are expected to grow, but forecasts point to a slower pace of gains. Core, retail sales data, is forecast to rise 0.20% down from 0.70% increase, seen a month before. The headline retail sales are forecast to rise 0.40%. Producer price index is expected to remain moderate, forecast to rise 0.10% on the headline and 0.20% on the core, slightly lower than June’s print.

CNY: The week ahead is data heavy for China. Import and export data is forecast to fall compared to a year ago and could result in a worsening trade balance. Other big events from China include the retail sales, industrial production numbers and fixed asset investment. Inflation figures will be released on Tuesday and forecast points to a slower than expected increase of 1.70%, down from 1.90% seen a month before. PPI is however expected to continue to improve with forecasts pointing to a 2.0% decline.

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