Political plays at US & EU dominated global markets during last-week and helped the US Dollar Index (I.USDX) to register third consecutive weekly gains on upbeat data-points by avoiding neutral FOMC minutes. The EUR, however, had to bear the burden of French political trauma whereas GBP managed to enjoy upbeat GDP figures and JPY kept gaining safe-haven support. Further, the AUD failed to extend its rally, even after hawkish RBA minutes, and the NZD also struggled to keep its strength intact as strong USD curbed commodity gains. Further, the CAD remained disturbed, with mixed Retail Sales & CPI figure, while less clear demand-supply outlook of Crude, noted by rising US crude stockpiles and optimism of OPEC-led production-cut accord, couldn't favor energy traders.
As we enter the first week of March, there are many top-tier fundamental details and crucial speeches by some influential policymakers that would offer noticeable Forex moves. Important amongst them are, GDP figures from US, Australia and Canada, Chinese and UK PMIs, EU Flash CPI, US CB Consumer Confidence, Durable Goods Orders and Japanese Inflation & Industrial Production figures. Other than these top-notch readings, US President's speech, monetary policy meeting by the Bank of Canada and the Fed Chair's public appearance at Chicago are some additional events that could offer busy schedule to traders. Let's quickly understand each one of them.
USD Traders' Busy Week
Unlike last week, this week's US economic calendar is comparatively stronger with US GDP, Consumer Confidence and Durable Goods Orders carrying the importance on data-front while first congressional speech by Mr. President and Fed Chair's appearance at Executives Club of Chicago likely dominating the news.
US Durable Goods Orders, on Monday, becomes the first reading from the world's largest economy and is expected to please greenback traders with 1.6% growth as compared to prior contraction of -0.5%; however, the Core reading is likely to remain unchanged at 0.5%. Moving towards the biggest US economic reading, Preliminary US GDP for Q4 2016, up for Tuesday, the reading is expected to extend prior greenback up-moves with 2.1% mark versus 1.9% initial estimation but another reading on the same-day, namely CB Consumer Confidence, might curb the USD traders' optimism with 111.10 mark versus 111.8 earlier release.
Wednesday becomes crucial for the USD traders and global markets as US President, Donald Trump, is scheduled to speak before the Congress for the first-time after being elected. Considering latest news, it is certain that Mr. President would be throwing lights on his fiscal offerings and might avail this opportunity to discuss how well he can help the economy to grow. Some of the administration members have lately confirmed a good sign that Trump may announce tax aids to middle-class with heavy defense-spending while leaving some of the Medicare and Social Security helps untouched.
Moving on, monthly releases of ISM Manufacturing PMI, Personal Spending and Personal Income figures could increase the importance of Wednesday. While Personal Income and Spending are expected to go soft with +0.3% and -0.1% figures compared to their +0.5% and +0.3% respective priors, ISM Manufacturing PMI might soothe the pain with 56.1 number versus its 56.0 released last month. At last, the Fed Chair's appearance at Chicago Executives Club, on Friday, will sum the week up but Yellen might avail this presence to re-communicate her faith in US economic improvement which in-turn could help US Central Bank to announce another rate-hike in near-future.
Hence, while data-points are mostly indicating further advances of the greenback, traders would closely observe Trump's and Yellen's words to determine near-term USD moves. Given both these personalities convey hawkish statements relating to US economic improvement and Mr. President pleases traders with details of his tax plans, chances of US Dollar's upward trajectory become brighter.
UK PMIs To Portray GBP Moves
Considering the strength of latest UK economics, this week's headline PMIs from Britain, namely Manufacturing, Construction and Services PMI, become crucial for the GBP traders as sustained economic strength could offer an upper hand to UK policymakers when they would confront EU to discuss Article 50 in March.
Slew of PMIs starts from Wednesday when Manufacturing PMI will be the first to roll-out which then will be followed by Construction PMI and Services PMI releases on Thursday and Friday respectively. The Manufacturing PMI is expected to soften a bit to 55.7 from 55.9 while the Construction PMI may remain almost unchanged with 52.1 mark against 52.2 prior. However, the Services PMI bears the consensus to flash four-month low of 54.2 compared to its 54.5 earlier print.
With all of the scheduled PMIs indicating softness of UK economy, chances of the GBP's pullback become brighter. However, 1.2350 seems important support to determine short-term GBPUSD moves, breaking which 1.2220 can come-back on the chart. On the contrary, continued strong economics and GBPUSD's sustained trading above 100-day SMA figure of 1.2400 might help it to challenge 1.2700 mark.
EU & Japanese Inflation Numbers Shouldn't Be Ignored
In a run-up to flash important data-points, EU and Japan aren't lagged behind as EU is scheduled to publish Flash CPI on Thursday while Japanese Prelim Industrial Production, Retail Sales and Inflation are also up for release during the week.
EU Flash CPI and Core CPI are both likely to remain unchanged at their previous 1.8% & 0.9% respective marks and are less expected to provide any significant EUR moves unless being drastically up or down. However, political problems at France and weaker inflation, coupled with upbeat US environment, may drag the EURUSD towards 1.0450 with 100-day SMA of 1.0700 acting as strong near-term resistance.
At Japan, Monday's Prelim Industrial Production & Retail Sales are showing mixed results as Industrial Production may weaken a bit to 0.4% from 0.7% while Retail Sales are expected to flash strength with 1.0% mark against 0.7% prior. Further, Inflation & Unemployment rate, up for late-Thursday, as per UK time, may help the JPY extend its upside with Tokyo Core CPI likely to reverse it prior -0.3% mark with +0.2% and the Unemployment Rate might weaken to 3.0% from 3.1% earlier. Considering present macro uncertainty and expected strength of Japanese data-points, USDJPY may break its 111.50-35 important support and aim for 110.00 round-figure. However, strong USD and lack of data-support could propel the pair towards revisiting 113.80 – 114.00 area.
AU & Chinese Stats Would Play Their Role
As the case being every-time, start of the month becomes crucial for AUD traders when Chinese authorities are scheduled to release their official Manufacturing & Non-Manufacturing PMIs and the Caixin also stands ready for publishing its Manufacturing gauge for China. This time the importance has been doubled as Australian Bureau of Statistics is scheduled for publishing quarterly GDP figure on the very same day.
Looking at the forecasts, China's Manufacturing gauges may flash subdued signal with official Manufacturing PMI expected to flash 51.2 figure compared 51.3 prior and Caixin Manufacturing PMI likely giving 50.9 number against 51.0 earlier. However, Non-Manufacturing PMI might keep rising beyond 54.6 prior and can please commodity traders. On the other hand, Australian GDP is expected to reverse its prior contraction mark of -0.5% with +0.7% whereas the Trade Balance and Building Permits, scheduled for Thursday release, could also be welcomed with 3.82B Trade surplus and -0.4% housing stat compared to 3.51B and -1.2% respective priors.
Even if Chinese PMIs aren't showing strong signs, an expected rise in AU figures could please AUD traders when they expect 0.7800 mark for the AUDUSD. Though, disappointments would bear higher costs and can fetch the pair to test sub-0.7600 region.
BoC & Canadian Details Are Crucial Too
If at all traders' want more than what mentioned above, monetary Policy meeting by the Bank of Canada, on Wednesday, and monthly reading of Canadian GDP, up for Thursday, are standing at the last stand to entertain them.
The Bank of Canada (BoC), even if less expected to alter its present monetary policy, might praise latest economics and can help the CAD to enjoy upside but the GDP can curb additional declines of the USDCAD with 0.3% mark against 0.4% prior. Moreover, Crude prices are also struggling to justify production-cut with higher US stockpiles and rig counts. So, changes at the energy front will have to be observed, together with BoC and Canadian data-points, in order to determine near-term USDCAD moves. However, considering comparative weakness of the CAD, chances of the USDCAD to again challenge 1.3210 are higher with 1.3000 being immediate important support.
Cheers and Safe Trading,
Anil Panchal