Global analysts got nothing but disappointment from last week's monetary policy meetings of US Federal Reserve and Bank of Japan as the US central banker failed to provide any clear signs of the December rate-hike and cut longer-run forecasts of interest-rate-lifts while its Japanese counterpart refrained from cutting the benchmark interest-rate further into negative territory and rather announced yield-targeting. As a result, the US Dollar Index (I.USDX) reversed its previous weekly gains and dipped on the negative side while JPY rallied for one more week after giving a bit shock to the Japanese currency towards south. The same moves helped commodity currencies, like AUD and CAD, to further extend their north-run while NZD couldn't please Kiwi Bulls as RBNZ favored further monetary policy easing. Further, the EUR also rose on a weekly basis with upbeat PMIs but the GBP had to bear the cost of renewed pessimism at BoE. Moreover, the Crude got additional support from weaker US inventory details and managed to provide gains to energy traders ahead of the crucial meeting in Algeria scheduled during this week.
Following last week's thin economic calendar, the present week has more data-points to please momentum traders. Among the headline releases, final version of Q2 2016 GDP from US and UK, coupled with EU Flash CPI and Chinese PMIs are likely to generate key volatility moves while US Housing details, Consumer Confidence, Durable Goods Orders and Chicago PMI, coupled with Japanese Inflation, might continue maintaining the liquid trading sessions. In addition to economic details, Monday's first round of US Presidential Election debate and Wednesday's meeting of global oil producer are some of the key events that need to be observed closely. Let's quickly describe each of them.
US Economics Gains More Importance
Unlike previous instances, all of the US incoming data-points bear additional weight as the Fed continues giving priority to immediate economics before they reach the crucial December meeting. Hence, top-tier details, like GDP growth, CB Consumer Confidence and Durable Goods Orders are important to forecast near-term USD moves.
Final reading of the US Q2 2016 GDP, up for release on Thursday, becomes an important data-point for the greenback traders as the US central bank has already cut down its longer-run forecasts for growth and a sustained weakness in top-tier detail might continue raising bars for its targeted rate-lift in 2016. The growth figure printed 1.1% mark during earlier predictions but is likely to flash 1.3% advance at this time, which in-turn proves the word from some of the FOMC members that US economy is strong enough to sustain second rate-hike and might strengthen the case for such announcement by year-end. Other than GDP, Tuesday's CB Consumer Confidenceand the Wednesday's Durable Goods Orders also join the league of front-tier details. Consensus signal that confidence among US consumer weakened from its previous upbeat figure of 101.1 to 98.6 while Durable Goods Ordersis expected to shrink by -1.0% versus 4.4% prior growth and the Core reading may also curtail with -0.5% mark against +1.3% downwardly revised prior.
Additionally, Monday's New Home Sales, Thursday's Pending Home Sales and Friday's Personal Income-Spending details, together with Chicago PMI, are some of the second-tier data-points that could continue providing intermediate USD moves to traders. While New Home Sales and Pending Home Sales are likely to threaten US housing market recovery with 598K and -0.1% figure compared to 654K and +1.3% respective priors, the Chicago PMI might please greenback bulls with 52.1 mark against 51.5 previous release. Moreover, the Personal Income and Spending both are likely to soften to 0.2% mark against 0.4% and 0.3% respective numbers registered earlier.
On the political front, US Presidential Election debate on Monday become a highlight as majority of the traders would like to see Trump witnessing a lag behind Hillary Clinton, which is less likely to happen considering the Donald Trump's aggression. However, a soft but effective rule of Clinton can please greenback traders.
Hence, while upbeat GDP needs to confront with Consumer Confidence and Durable Goods Orders to please US Dollar Bulls, weaker prints of such headline figures can further fade the speculations governing Fed's 2016 rate-hike and might extend greenback's downside.
Moreover, Trump's lead ahead of the Hillary Clinton could also provide additional weakness to the US currency as drastic measures proposed by him are perceived to harm the US economy.
EU Flash CPI & UK GDP Are For EUR & GBP Traders To Observe
Contrast to US economics, which are likely to rule this week's market moves, there are fewer releases from EU and UK to help EUR and GBP traders in forecasting near-term trends. Friday becomes the only day of the week when both these economies have something to offer to analysts. On that day, final version of UK GDP and Flash reading of EU CPI are scheduled for publish. While EU CPI is expected to rally towards the highest reading since January, with 0.4% mark against 0.2% prior, the UK GDPis expected to let the growth figures unchanged at 0.6%. Further, the Core reading of EU CPI might also favor EUR bulls with 0.9% mark against 0.8% prior.
With the renewed optimism at ECB, an upbeat print of the CPI could further propel the EUR while a stagnant UK GDP, which is less likely to appear considering latest weakness at UK calendar, can help the GBP stop its running decline.
Algerian Meeting, Japanese Inflation And Chinese PMIs Are The Rest
After FOMC and BoJ, what market players were more concerned about is the global oil producers' meeting in Algeria on Wednesday where these energy leaders are scheduled for discussing a freeze on Oil-Production limit. Looking at the recent news-stream, Algerian authority, coupled with Russian leaders, have signaled more likelihood for such agreement to take place while Saudi Arabia and Iran, the core contrasts, are again pulling each-other to take the first step before they adhere to such discussions.
Friday's Caixin Manufacturing PMI, followed by Saturday's Manufacturing PMI & Non-Manufacturing PMI from China become more important for commodity currencies as recent data from China has been good enough. The Caixin Manufacturing PMI is expected to print 50.1 mark against 50.00 prior while the official Manufacturing PMI could also please commodity traders with 50.5 mark against 50.4 previous mark. Further, the official Non-Manufacturing PMI is also likely to surpass previous 53.5 mark and can propel the AUD, NZD and CAD further towards north. At the Japanese front, official CPI, up for release on Friday, is expected to soften to -0.4% from -0.5% prior and can continue indicating the JPY upside.
Given the middle-east leaders' incapacity to agree on such moves, chances of the failure to Algerian discussion are more likely and the same can continue signaling extended global-supply glut, which in-turn could trigger fresh south-run of the Crude prices and commodity currencies. However, upbeat Chinese data-points might help sooth their pains for the time being. Additionally, the Inflation improvement at Japan can prove that the BoJ is in its right foot, which in-turn favors further advances of the JPY.
Cheers and Safe Trading,
Anil Panchal