For all those seeking clear details on Trump's fiscal and tax policies during his first press conference, after being elected as US President, last week was a disappointment as Mr. Trump refrained from discussing any such things and focused more on divisive policies. With this, the US Dollar extended its recent southward trajectory to third straight week and ignored positive details for Retail Sales and Jobless Claims. Moving ahead, the GBP couldn't enjoy upbeat economics as uncertainty over Brexit discussions kept dragging the Pound to south whereas the EUR managed to remain strong on few better than expected data-points, including Industrial Production & German Trade Balance. Furthermore, safe-havens, like JPY and Gold, benefited from weaker greenback and macro pessimism concerning US, UK and EU while improvement in Chinese figures helped AUD, NZD and CAD to stretch their north-run. Additionally, higher than expected Crude inventories and doubts over Oil producers' agreement to tame global supply-glut weakened energy prices towards a month's low.
Starting Monday, the Forex market maintained its volatility, mainly dealing with GBP plunge, as Sunday Times reported that UK PM will prefer more of border security & laws than to have Britain's entry-gate status while addressing press on Tuesday. The same provided additional fuel to safe-havens like JPY and Gold while US markets are closed due to Martin Luther King Day.
Mainstream political waves from US and UK are likely to keep dominating upcoming forex moves while top-tier figures of Inflation and Job numbers could make traders busy throughout the week. Looking at economics, CPI figures from US, UK and Canada, coupled with monetary policy meetings of ECB and BoC, following AU and British employment details, may generate headlines while US Housing and Manufacturing figures, together with Chinese GDP and Industrial Production may entertain market players. Let's go ahead and discuss them in detail.
Yellen, Trump And Inflation Are All Crucial For US Dollar
Ever since the FOMC minutes termed Trump administration's fiscal policies as a threat to US inflation outlook, the US Dollar maintained its downturn and has recently been disappointed when upcoming US President failed to discuss details of any such programs. However, this week becomes crucial for US as Donald Trump administration will put its step forward towards white house and accept Presidency while Janet Yellen will also address press during Wednesday and Thursday. Further, Wednesday's US CPI becomes another important detail for greenback traders to watch as a lingering figure may spread additional worries relating to the future of US during Trump Presidency.
Looking at CPI, the YoY figures are heading towards Fed's 2.0% target, with 2.1% forecast and 1.7% prior, while Core CPI is also indicating further upside to 2.2% mark against 2.1% earlier figure. Monthly figures may as well please greenback Bulls with 0.3% CPI mark and 0.2% Core CPI against 0.2% being prior for both of them.
In addition to CPI, Tuesday's Empire State Manufacturing Index, Wednesday's Industrial Production and Thursday's Housing numbers and Philly Fed Manufacturing Index, are some other data-points that can help forecast near-term USD moves. While Manufacturing indices are pointing towards weakness in US economy with 8.1 and 16.3 marks of Empire State and Philly Fed gauges respectively against 9.0 and 21.5 prior, the housing figure has good news to offer with Building Permits likely growing to 1.22M versus 1.20M earlier and Housing Starts rising to 1.19M compared to 1.09M earlier. Furthermore, Industrial Production is more likely to reverse its previous -0.4% contraction with +0.8% advance figure.
Moving away from data-points, Janet Yellen is expected to soothe USD Bulls' pain during her Wednesday and Thursday's appearances at San Francisco by conveying strength of the world's largest economy; however, CPI will pave her base and if Inflation figures aren't good she might focus more on how Trump effect could help US. On the other hand, Friday will be the first day of Mr. Donald Trump as US President and market players will closely observe what he would do on his start as he already pledged to take too many actions while campaigning for the job. Amongst his actions, things pertaining to China and Mexico, coupled with loose signals for fiscal plans may have higher impacts on market.
Hence, while economics may stop running declines of the USD, traders would analyze words by Yellen and how Trump would react on his first day. Given the Fed Chair's hawkish statements and a bit pleasant surprise by Mr. Trump's acts, chances of the greenback's up-move seem expected. In case Yellen and Trump both fail to please market players with any strong cues relating to future of US, the US Dollar becomes vulnerable to plunge.
Pound Traders Shouldn't Leave Their Desks
While early Monday's drop of GBP was considered to be harsh for Pound traders, it's just a start ahead of crucial week when the BoE Governor and UK PM will address press on late-Monday and Tuesday respectively. At the economic front, Tuesday's CPI, Wednesday's Job Figures and Friday's Retail Sales are crucial data-points that shouldn't be missed.
Being the first public appearance of BoE Governor, Mark Carney, during 2017, he is scheduled to speak on "Policy Issues Affecting the Bank of England" and might point towards Brexit as a challenge, which in-turn force investors to look for details relating to how the central bank stands ready to act upon any negative impact of post-Brexit era.
On the other hand, UK PM, Theresa May, is also up for speaking about Brexit at London. Due to the recent news from Sunday Times, she would be questioned on matters relating to whether the UK stands ready to lose its entry-gate status in search of better immigration rules.
At the economic door-step, CPI is likely to please GBP traders with 1.4% mark against 1.2% prior while Retail Sales and Job numbers have mixed consensus. The Retail Sales is expected to shrink by -0.1% against +0.2% prior whereas Average Earnings may grow 2.6% versus 2.5% earlier. Further, Claimant Count could advance by 4.6K compared to 2.4K prior but the Unemployment Rate is expected to remain stagnant at 4.8%.
Even as scheduled data-points continue portraying strong picture of the British economy, comments from UK PM and BoE Governor would be analyzed closely.
Should the BoE Governor point at nation's recent strength and lauds inbuilt mechanism to sustain for long and the UK PM refrains from being too harsh on EU demand, chances of the GBP reversal to 1.2300 can't be denied. However, more are the expectations that UK PM would hurt the GBPUSD further towards 1.1800 mark.
Central Banks And Economics To Direct EUR & CAD Trend
Monetary policy meetings of the Bank of Canada (BoC) and the European Central Bank (ECB), up for Wednesday and Thursday respectively, become important for CAD and EUR traders. Even if both the central banks aren't expected to alter their present monetary policy, press conference by the respective heads may help determine near-term move of the Canadian and European currencies.
Other than monetary policy meetings, Tuesday's EU & German ZEW Economic Sentiment, followed by Wednesday's EU Final CPI and Friday's Canadian CPI & Retail Sales, are some data-points that should be observed by traders. While ZEW figures keep depicting EU & Germany as stronger economies with 18.9 & 24.2 figures against 13.8 & 18.1 respective prior, Final CPI is likely to confirm more than 3 years' high of 1.1%. Further, Canadian CPI and Retail Sales indicate mixed signals as CPI is expected to strengthen a bit from -0.4% prior to -0.1% and the Retail Sales may soften to 0.5% versus 1.1% earlier mark.
Given the EU stats keep portraying good picture of European economy and Mr. Draghi maintains his hawkish mode, chances of the EURUSD to challenge 1.0850 can't be denied. However, strong USD up-moves, coupled with a bit weaker tone of the ECB President and/or disappointing data-point, might drag the pair down towards sub-1.0400 region.
For USDCAD, BoC Governor is expected to praise recent upswings in Canadian data-points and might fetch the pair to 1.0300 but declining Crude prices and surprise weakness in economics could trigger its advances to 1.3300 round figure.
AU And Chinese Data-Points Stands At Last Stand
If traders aren't fed-up from aforementioned details, Australian Job figures, up for Thursday, followed by Friday's Chinese GDP & Industrial Production, stands ready to propel market moves.
Forecasts suggests that Australian Employment Change may soften a bit from 39.1K earlier by registering 10.2K mark but the Unemployment Rate is less likely to differ from 5.7%. Further, Chinese GDP could confirm 6.7% mark whereas Industrial Production might register negligible weakness of 6.1% from 6.2%.
Although 0.7500 and 0.7525 continue becoming strong barriers for AUDUSD's north-run, upbeat data-points may help the pair to aim for 0.7600 round figure. However, any disappointment could have larger than expected repercussions and might extend the quote's recent pullback towards 0.7350-45 region.
Cheers and Safe Trading,
Anil Panchal