Global financial traders couldn't get anything more but disappointment from last week's economic calendar wherein the US consumer-centric details pulled back speculations of a rate-hike in 2016 and the RBNZ, even after announcing 0.25% rate-cut, avoided giving any signals for another rate-cut. Bears gained control over the USD from the week-start when mixed labor market releases forced greenback bulls to curtail their bets of a Fed-rate-hike. The downturn got additional shock when the Retail Sales, coupled with consumer sentiment, revealed weakness of world's largest economy during later part of the week. As a result, the US Dollar Index (I.USDX) had to reverse its previous gains and close the week on a negative note. Moving on, the EUR managed to extend its recent upside on German details while GBP kept lagging behind with pessimistic economics. However, the USD drop helped commodity prices, and in-turn the commodity currencies, namely AUD, NZD and CAD, which also got benefited from domestic data-points and a second weekly advance of Crude. Furthermore, the JPY shined with global disappointment driven safe-haven demand while statement from Saudi Energy Minister, later repeated by Russian authority, raised hopes for oil-production freeze talks between major Crude producers during September meeting.
The ex-USD mood of market stretched during the current week when the US Empire State Manufacturing unexpectedly shrank on Monday; though, GBP gained some relief when the headline UK CPI, released on Tuesday, rallied to the highest since December 2014.
Troubled with slew of downbeat economics from US and surprisingly upbeat stats form rest of the world, market players now need to closely observe US CPI figure and minutes of the recent FOMC meeting in order to either put their longs off or remain optimistic for the Federal Reserve's rate increase announcement. Additionally, labor market numbers from New-Zealand, UK and Australia, together with UK Retail Sales and Canadian CPI, are some other figures that could continue maintaining the market momentum. Let's quickly analyze them.
US Inflation And FOMC Minutes Are In Lime-Light
While majorly all the US economics after NFP failed to nurture greenback bulls, the optimism surrounding a second in a decade rate-hike from US central banker is still not at the grounds. On the contrast, some of the marketers have put more emphasis on Tuesday's CPI and Wednesday's FOMC meeting minutes in order to put fresh US Dollar longs after labor market releases have already pleased them. Hence, both these days are crucial for the greenback traders and for the Forex market as well.
The headline CPI remained unchanged at 1.0% during its previous release and the Core reading extended its upside to four-year high with 2.3% gains. The inflation readings, up for release on Tuesday, are expected to generate another drag wherein the CPI might print 0.9% mark and the Core reading is likely remaining unchanged at 2.3% with month-on-month figures expected to print 0.0% against 0.2% prior and the same 0.2% when it comes to CPI and Core CPI respectively. Considering the recent personal Spending and Retail Sales numbers, chances of these stats to match consensus and drag the USD further towards south are brighter.
Moving to the Wednesday's FOMC meeting minutes, the US central banker maintained its neutral tone about rate-hike signals when it met in late-July. However, it did say that the Brexit risks have subsided on the US economy and some of the FOMC members, during their personal appearances after the meeting, favored at-least one rate-hike in 2016. Additionally, monthly progress of Philly Fed Manufacturing Index & weekly Jobless Claims, up for Thursday release, are some second-tier details that could continue helping greenback moves. The Philly Fed Manufacturing bears the forecast of reversing prior -2.9 figure with +1.4 but the Jobless Claims might inch a bit up from 266K to 269K. Furthermore, Tuesday's Building Permits and Housing Starts can also be considered for USD trade decision-making given these housing details register noticeable differences from their prior to 1.15M and 1.19M respectively. However, both these figures are expected to print 1.16M and 1.18M, with small changes, and might lose its value as the CPI becomes more important and is scheduled to release with these housing numbers.
With the recent downtick in Retail Sales, mixed Spending details and weaker manufacturing numbers, the US inflation figure might continue spreading US Dollar pessimism; though, the FOMC meeting minutes has more influence to pare greenback's recent losses as the latest meeting wasn't followed by the Chair's press conference. Hence, an upbeat statement in minutes, coupled with continuation of a rise in Core CPI can help soothe some pains of the US Dollar traders.
GBP Traders Shouldn't Miss UK Job Details And Retail Sales
As an unexpected increase in UK CPI triggered short-covering rally for the GBP, UK Retail Sales and Job numbers, scheduled for release on Wednesday and Thursday, become even more important for the Pound traders. While the Average Earnings are likely to rally towards the highest level in 2016 with 2.5% gain versus 2.3% prior, the Claimant Count Change is expected to rise with 5.2K mark than the 0.4K previous and the Unemployment Rate might remain stagnant at 4.9%. Further, the Retail Sales, important for the UK GDP, is also expected to reverse its earlier -0.9% contraction with +0.1% mark.
With the GBP has already at the grounds since Brexit announcement, should Job figures and Retail Sales follow the latest upbeat UK CPI, chances of the GBP recovery can't be denied.
Hints For New-Zealand And Australian Labor Market Numbers
Off-late, recovery in commodity prices and a halt to downbeat Chinese figures, coupled with RBA & RBNZ actions, helped both the AUD and NZD to extend their north-run. However, headline labor market details from New-Zealand and Australia, up for Wednesday and Thursday respectively, become important for these commodity-currency traders as both these details are likely to print another set of upbeat marks.
The New-Zealand Unemployment rate is likely to dip towards testing the lowest level since May 2009 with 5.3% mark against 5.7% prior and the Employment Change could soften a bit with 0.6% growth than the 1.2% prior. At the AU front, Employment Change might rally with 10.2K figure as compared to 7.9K earlier but the Unemployment Rate might remain unchanged at 5.8%.
Considering the latest optimism for AUD and NZD, upbeat job details, which are more likely, can extend upsides for the currencies of Australia and New-Zealand towards fresh highs of the year.
At the Last Stand: Canadian And European CPI
Other than the aforementioned top-tier details, Final reading of EU CPI, up for Thursday and the Friday's Canadian CPI & Retail Sales, are holding the last door to open for the market players to end the week.
EU Inflation reading is expected to confirm the 0.2% initial forecast while the Canadian CPI might weaken to 0.0% against 0.2% prior and the Core CPI can remain unchanged at 0.0%. However, the Canadian Retail Sales may please the CAD traders with 0.8% mark against 0.2% prior but the Core reading is likely fading the happiness with 0.4% mark as compared to 0.9%.
Even if the Canadian Inflation mark might not please the CAD traders, on-going run-up of the Crude prices, coupled with the Retail Sales' increment, might extend the Canadian Dollar's northwards trajectory. On the other hand, downbeat EU CPI, although not likely to change, might force the ECB towards additional monetary easing and can drag the EUR to south.
Cheers and safe trading,
Anil Panchal