It's no secret that global financial markets welcomed an unexpected Republic win after Donald Trump posed as a bit more focused and less fierce President during his victory speech that pleased investors who were worried about his rise few days ago. The US Dollar rallied against all of its counterparts on expectations that Trump's administration will boost economic growth and inflation, which in-turn can make the Federal Reserve's tightening cycle more easy. However, commodity currencies and the EUR couldn't digest election results as the "protectionist" might become a threat for China and some other major economies' trade relations with US. Further, the Pound was on a clear up-move as investors perceived Trump as a welcome leader for new-UK-US bonding but the JPY and Gold had to liquidate heavy loads on declining safe-haven demand. Additionally, speculations concerning another failed attempt on the part of OPEC and news of higher production from Iran, Iraq and Saud-Arabia dragged the Crude prices further towards south.
As we move forward from last week's election triggered volatility, Monday didn't start with any U-turns as a dip in Chinese Industrial Production and downbeat tone of Japanese leaders kept weakening commodity currencies and the JPY while GBP and USD continued being traders' favorite. Moving on, this week's headline Inflation figures from US, UK and Canada, coupled with UK and AU Job numbers, are likely important stats that market-players would analyze more. Additionally, UK and US Retail Sales, followed by the Fed Chair's testimony, are some other events that could provide noticeable volatility into the world's largest financial market, Forex. Let's briefly understand the fundamental aspect of these details/events.
CPI And Fed Chair's Testimony Are In USD Traders' Radar
With the Donald Trump victory already boosting December Fed Rate-hike speculations, CPI and the Fed Chair's Testimony become even more important for USD traders ahead of the crucial December meeting of the US Federal Reserve.
US Inflation, the CPI, rallied to two-month high of 1.5% YoY during its October release and is expected to print 1.6% gain during its Thursday's scheduled release while the Core CPI might refrain from altering its 2.2% prior which dipped from 2.3% mark of the previous month. Looking at the monthly details, the CPI may please greenback traders with 0.4% figure against 0.3% previous and the Core CPI can also join the league by flashing 0.2% mark as compared to 0.1% earlier.
Other than the CPI, one more consumer-centric detail, namely, Retail Sales, is scheduled for guiding greenback moves, together with Empire State Manufacturing, on Tuesday. While earlier optimism for Hillary win has been a cause for US nationals to boost their spending, Retail Sales and Core Retail Sales are less likely to reflect the same behavior as both these details might reprint the previous figures of 0.6% and 0.5% respectively. However, the Empire State Manufacturing might help the USD bulls as the manufacturing index is likely testing the lowest level in three-month, to -1.5 from -6.8 prior.
Further, the Fed Chair's testimony on Thursday, just after the CPI release, also becomes an important event for analysts to observe as Trump victory and present run of positive economics has to be uttered by the Fed leader in order to signal her final chance to Fed rate-lift during December. During the Testimony, Janet Yellen may welcome Trump victory, even if she doesn't mean it, and could also praise the latest economic strings that might fetch the Federal Reserve near to its second in a decade rate-hike during December. Additionally, Wednesday's PPI and Thursday's Philly Fed Manufacturing Index & Housing Starts are some other data-points for greenback traders to look at. While PPI may reprint the old 0.3% growth-rate, the Philly index can disappoint markets with 8.1 mark compared to their 9.7 prior but the Housing Starts could continue entertaining Bulls with 1.16M figure against 1.05M earlier release.
Hence, present market optimism is more likely to be bolstered by consumer-centric details and Fed Chair's testimony favoring December rate-hike. However, disappointments from these events/details may trigger profit-booking moves of the greenback.
Technically, EURUSD traders need to take care of 1.0700 longer-term TL support, breaking which 1.0550-45 become reality while disappointment driven up-move by the pair can reprint 1.0950 and the 1.1120-30 on the charts.
UK Consumer-Centric Figures To Portray GBP Moves
While US election results have raised hopes that fresh ties between US and New UK would help the Britain overcome its near-term losses from Brexit, headline consumer-centric details, namely CPI and Retail Sales, together with UK job details, might provide important data-facts to help foresee near-term moves of the GBP.
Tuesday's UK CPI is likely to extend its surge and test fresh high since November 2014 with 1.1% mark versus 1.0% prior while Thursday's Retail Sales can also please GBP traders by rising to 0.5% mark from 0.0% prior. However, Jobs report, on Wednesday, has something bad for Pound traders in terms of Claimant Count Change which is expected to rise by 1.9K from 0.7K prior but the stagnant levels of Unemployment rate and Average Earnings, at 4.9% and 2.3% respectively, might soothe the pain.
Looking at the recent trend of upbeat UK details and US election aftershocks, this week's consumer-centric details might continue maintaining the same optimism for the GBPUSD to test the crucial 1.2780 resistance. Though, weaker job figures might disappoint pair traders and can drag the quote to 1.2330 and 1.2100 during reversal.
Mixed Plays of AU And New-Zealand Data-Points
Alike other economics, job details from Australia, New-Zealand Retail Sales and PPI are also likely to provide important signals for their respective currencies. While earth-quake at New-Zealand is affecting most to the NZD, the nation postponed data release time to later-this week. The quarterly reading of New-Zealand Retail Sales is likely softening down to 0.8% from 2.3% prior while the PPI can also indicate weakness in manufacturer's inflation.
At the Australian front, Thursday's Employment Change may help the Aussie recover some of its latest losses with 20.3K figure compared to its previous dip of -9.8K but rise in Unemployment rate to 5.7% from 5.6% could confine any major gains of the AUDUSD.
As Trump victory continue being a threat for such commodity currencies via China, New-Zealand earthquake and soft Retail Sales, together with higher Unemployment at Australia, may keep signaling further weakness of the NZD and AUD respectively. However, 0.7440 and the 0.6950 continue acting as strong support for AUDUSD and NZDUSD with upbeat figures indicating their reversal to 0.7650 and 0.7270 in the same line.
EU ZEW Figures and Canadian CPI's Effects
At the last stage, German GDP, EU ZEW figures and Canadian CPI are waiting for investors' attention. While German GDP is expected to weaken from 0.4% to 0.3%, ZEW figures may please EUR traders with 7.9 of German reading and 14.3 mark for EU against 6.2 and 12.3 respective priors during Tuesday's release. For CAD traders, Friday's CPI figure is the only reading that can help forecast near-term moves of the Loonie, other than observing the Crude market. The CPI and Core CPI are both likely helping the Canadian Dollar to heal some of its latest pains with 0.2% and 0.3% growth marks compared to their previous releases of 0.1% and 0.2% respectively.For EUR traders, second-tier details might not be able to confront with US top-positives and could continue signaling weaker EURUSD unless being too optimistic. USDCAD may adhere to profit-booking if the Canadian CPI matches upbeat forecast but OPEC pessimism can continue being a reason for the Loonie pair to not dip much below 1.3430 support.
Cheers and Safe Trading,
Anil Panchal