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Fewer Economics To Confine This Week’s Forex Moves


Following the largely US Dollar favored market movement during last week, mainly backed by a surprise hike in QE from the BoE and a welcome consecutive increase in NFP print, the US Dollar Index (I.USDX) nursed majority of its previous losses and registered positive weekly gains. The EUR remained fragile while the GBP had to bear the burden of the UK central banker's monetary easing. Additionally, the Australian Dollar (AUD) couldn't let the bears in even after the RBA cut its benchmark interest-rate and the JPY also maintained its strength but the NZD dipped with expectations of a rate-cut from the RBNZ. Furthermore, Gold prices declined due to stronger greenback and the CAD benefited from the Crude profit-booking, which took place after the energy vehicle dropped below $40 mark for the first time in four-months.

Moving forward, the present week, which started with disappointing trade details from China, has fewer economic data-points/events that can offer magnified market volatility to the trader fraternity. However, monetary policy meeting of the Reserve Bank of New-Zealand (RBNZ), Chinese Inflation and Industrial Production numbers, US consumer-centric stats and the German – EU GDP figures can continue maintaining the trade-flow.

After NFP, US Consumer-Centric Details Are Important

Last week's surprise NFP hike, coupled with upbeat Earnings and improvement in Unemployment rates relating to skill-wise changes, raised the ray of hope that the US Federal Reserve might not deviate from its rate-hike plan of 2016. However, the US GDP couldn't please policymakers during July-end and hence details of the present week's consumer-centric numbers, namely the monthly Retail Sales and UoM Consumer Sentiment Index, become more important for the USD traders.

As indicated in the aforementioned chart, the US Retail Sales, up for release on Friday, grew 0.6% in the month of June and is expected to register a bit slow growth number of 0.4% this time while the Core Retail Sales is also forecasted to print the same trend with softer number of 0.2% against 0.7% prior. However, the UoM Consumer Sentiment Index, also scheduled for Friday release, might halt its two month old slide with an increase in a gauge to 91.5 from 90.00 prior mark. Additionally, the PPI, which will be released simultaneously with Retail Sales, might test three-month lows of 0.1% versus its 0.5% previous advance and the Core PPI can show 0.2% growth against 0.4% marked during June. Other than these headline data-points, weekly release of Jobless Claims, scheduled for Thursday, also becomes an important detail after the increase in NFP. The claim figure is expected to rally towards the highest level in more than a month, to 272K versus 269K prior.

Considering the recent uplift in job details and an increase in Spending details, chances of the Retail Sales and Consumer Sentiment printing upbeat numbers are higher. This in-turn can further strengthen speculations of a 2016 Fed rate-hike and magnify the recent USD up-move. However, pessimistic consumer-centric numbers, together with the sustained increase in Jobless figures, might erode the recent US Dollar optimism and could drag the greenback again towards south.

UK Manufacturing Production And EU & German GDP Are For the GBP & EUR Traders

With majority of headline releases already out, monthly releases of the UK Manufacturing Production, second estimate of EU Q2 2016 GDP and the Preliminary forecast of the German GDP, are only details that GBP and EUR traders should be worried for.

Tuesday's UK Manufacturing Production is expected to reverse its prior drop of -0.5% with +0.0% mark while the EU Flash GDP, up for release on Friday, might adhere to its initial forecast of 0.3% mark. Also, the German Prelim GDP might flash another worrisome light for the EUR traders as the region's largest economy is expected to grow by 0.3% from 0.7% prior mark.

Looking at recent pessimism at the UK & EU, a weaker UK Manufacturing Production and soft growth figures from EU and Germany could provide additional weakness to the GBP and EUR respectively.

Kiwi Traders Should Observe RBNZ And Quarterly Retail Sales From New-Zealand

After the RBA slashed its Cash-Rate for the second time in 2016, market players are eagerly awaiting the New-Zealand central banker's announcement of the same kind. Following the surprise economic analysis revealed weakness of New-Zealand economy, speculations mounted for the second rate-cut in 2016 from the RBNZ during its monetary policy meeting on Wednesday. The central banker is expected to fetch the Official Cash Rate (OCR) down to 2.00% from 2.25% present mark. In addition to the rate-cut, quarterly monetary policy statement and a press conference from the Governor, just after the meeting concludes, also become crucial. Furthermore, Thursday's quarterly Retail Sales, which can register a strong growth number of 1.0% against 0.8% prior, adds to the list on New-Zealand economic calendar.

With huge probabilities favoring the RBNZ's rate-cut, and the preceding decline in NZD, a disappointment from the central banker might provide noticeable strength to the New-Zealand Dollar (NZD). However, in case of a rate-cut, market players would concentrate more on the Governor's speech and the following Retail Sales figures, which if sound dovish, could trigger the NZD's decline.

Detail Form China And Japan Are The Rest

While Monday's Chinese Trade Balance details disappointed global commodity traders, monthly readings of headline inflation figures and the Industrial Production, up for Tuesday and Friday respectively, are crucial for the commodities like Crude and to the commodity currencies, like AUD, NZD and CAD.

The July month CPI from China is likely to register six-month's lowest figure of 1.7% against 1.9% prior and the PPI, even after expected to be a bit up with -2.0% from previous -2.6%, can continue remaining in negative. Further, the Industrial Production growth might remain stagnant at its three-month highs of 6.2%. While pessimistic Trade details have already set the stage for weaker commodity price outlook, downbeat numbers of the scheduled data-points from China can further stretch the current weakness in commodity prices and commodity currencies.

At Japan, Wednesday's monthly prints of PPI & Core Machinery Orders are the only details available for JPY traders. While Core Machinery Orders are expected to revive from -1.4% to +3.4%, the PPI can continue remaining in negative region, with -4.0% versus -4.2% prior. Even as scheduled data-points indicate a bit of pullback in JPY prices, BoJ's disappointment via lesser than expected stimulus, coupled with the market risk-off sentiment, might continue restricting excessive downside of the Japanese Yen.

Follow me on twitter to discuss latest markets events @Fx_Anil.

Tuesday, 09 Aug, 2016 / 3:04

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