FX Week Ahead: FOMC minutes, NFP, and RBA Meeting

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The week ahead will see a fresh set of economic data for the month of June. The economic releases coming out this week include the manufacturing PMI data from China, the UK, US, and the eurozone.

Later in the week, the FOMC meeting minutes are due followed by Friday’s non-farm payrolls report. Also this week, the RBA will be holding its monthly monetary policy meeting. Here’s a quick recap of this week’s forex events to watch for.

ISM Manufacturing PMI, FOMC Meeting, Nonfarm payrolls

A busy week for the US dollar, data starts off on Monday with the Institute of Supply Management’s manufacturing PMI. The manufacturing PMI has been steadily declining since April after the index touched 57.2 the month before. Since then, the ISM index had fallen to 54.9 last month.

U.S. ISM Manufacturing Index May 2017 (54.9 vs. 54.5) (Source: Investing.com)
US ISM Manufacturing Index May 2017 (54.9 vs. 54.5) (Source: Investing.com)

Mid-week, the FOMC meeting minutes will be released. The minutes will be from the early June Fed meeting where interest rates were hiked by 25 basis points. More information is likely to come out on the individual views of other policymakers.

Any signs of dovishness could potentially keep the markets biased to the downside as far as the US dollar is concerned.

The US economic data ends with a bang with Friday’s nonfarm payrolls report. Investors will be looking at the wage growth trends as well as the number of jobs created during the month of June.

A surprise beat on the estimates could potentially see the markets turn bullish and maintain the hawkish stance from the Fed.

The US dollar weakened last week following the hawkish comments from the ECB, BoE, and the BoC governors. Therefore, a positive string of data could potentially see the markets re-price the bullishness.

Eurozone manufacturing and services PMI’s

From the Eurozone data, this week will see the Eurozone composite manufacturing and services PMI data being released. A continued uptick in the PMI’s could potentially keep the hawkish expectations aligned with the markets.

Eurozone Flash Composite PMI (For June 2017, 55.7) (Source: Markit)
Eurozone Flash Composite PMI (For June 2017, 55.7) (Source: Markit)

Flash data released two weeks before showed that the flash composite PMI fell to a 5-month low at 55.7. Other exceptions were the French flash services PMI which were seen falling to 55.3 from 57.1 while the German flash services PMI fell to 53.7 from 55.4 previously.

While a weaker reading is unlikely to make much of an impact, the markets could potentially turn cautious on the euro in an effort to not get ahead of expectations.

Besides the PMI’s other data from the eurozone will include the ECB’s monetary policy meeting minutes, retail sales data for the eurozone and Germany’s industrial production figures.

RBA monetary policy meeting to see no changes

The Reserve Bank of Australia will be meeting this week on Tuesday. The monetary policy meeting comes just a few weeks after the June 6 monetary policy meeting. Given that there hasn’t been much development in the economy, the RBA is likely to maintain its neutral stance. Interest rates in Australia are steady at 1.50%.

The central bank had mentioned in its very recent monetary policy meeting that it would keep interest rates steady. At the same time, the central bank noted that it was waiting for the housing prices to stabilize. Home prices in Australia have surged on the back of an easy monetary policy and low-interest rates. Efforts by housing regulators and banks have managed to put a lid on rising home prices.

Are Australia’s & New Zealand’s central banks intervening in FX market?

Around the same time, the retail sales figures from Australia will also be coming out, just ahead of the RBA meeting. The previous month’s figures were slightly encouraging as retail sales rose 1% on the month.

Besides the RBA meeting, the building approvals data is also coming out this week on Monday. Building approvals rose 4.4% last month.

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