The first full week, after Donald Trump won US Presidential election, gifted a big smile on USD traders' face as market smelled increased spending and Fed rate-hike from new administration. The greenback index (I.USDX) managed to test near 14 year high after Fed Chair, in her testimony, signaled December rate-lift as more likely while upbeat data-points added concerns of further US economic strength. With the US Dollar's optimistic rally, Japanese Yen and EUR were adversely affected as the same curbed JPY's safe-haven demand while Euro region remained pessimistic ahead of political waves in Italy, French and Germany. Further, the GBP also ticked down on BoE Governor's not-so-strong message and sluggish UK stats whereas commodity currencies, namely AUD and NZD, remained weak due to stronger USD curbing commodity demand. Moreover, OPEC & Russia's informal meeting at Doha provided noticeable gains to Crude prices on speculations that global energy-producers will be able to announce much awaited production-freeze accord during month-end formal meet, which in-turn helped CAD to recover some of its latest losses.
Unlike last week, the present week has comparatively fewer economic details/events, together with Thanksgiving-day break, which may negatively affect the Forex volatility. However, US FOMC Meeting minutes, Durable Goods Order and UK GDP are likely headline figures to help generate intermediate moves while EU Flash PMIs & Japanese CPI are some additional stats to offer active market-hours. Let's have a look at them.
FOMC Minutes May Strengthen December Rate-Hike Concerns
While Trump victory lauded the concerns of December Fed rate-hike, which are also conveyed by Janet Yellen and some FOMC members off-late, minutes of November Fed meeting, up for Wednesday, becomes crucial for the greenback traders to bet before the December start, the month which is more expected to provide another rate-hike announcement from the US central banker.
During its November meeting, the US Federal Reserve said "The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives", which expresses optimism at Fed.
Looking deeper at the statement, we came to know that majority of policymakers were almost certain that December is the month when they have to act while upbeat economic stats, coupled with Republican win, nurtured greenback Bulls afterwards.
Moving towards some other important releases of Wednesday, namely the Durable Goods Orders & New Home Sales. Forecasts suggests Order growth has been +1.2% positive for the month of October as compared to the previous contraction of -0.3% while Core figures may also reveal the same optimism with +0.2% mark against +0.1% prior. Additionally, New Home Sales seem softened a bit to 591K versus 593K earlier figure. Furthermore, Tuesday's Existing Home Sales is another housing market detail which also signals a bit weakness by printing 5.43M against 5.47M prior.
Hence, with the FOMC minutes almost certain to give another drag during the EURUSD's south-run, focus will be on Durable Goods Orders, which have to confront with weak housing figures for justifying the greenback's strength and fetch the quote to 1.0450.
However, an unexpected release from the minute statement concerning still weak inflation levels may harm the US currency's near-term strength and could trigger short-term pullback by the pair to 1.0800 resistance-mark.
UK GDP To Portray GBP Moves
US Presidential election have been a good news for UK currency traders as they perceived Trump to be a good politician for new-UK; however, the GBP couldn't sustain that optimism for long which forces traders to closely observe second estimate of Q3 2016 GDP, up for Friday.
Even if the UK GDP is likely to confirm initial 0.5% growth rate, dovish comments from the BoE Governor, coupled with not so good economics, raised doubts about the actual figure. Additionally, the Bank of England (BoE) has also indicated its readiness to act more aggressively in case if the national currency again dips towards south. Given the GDP figure disappoints Pound traders, speculations concerning another intervention by the UK central bank become too high, which in-turn could fetch the GBPUSD to 1.2130. Though, an unchanged or higher print may well propel the pair towards 1.2600 upside level.
EUR Traders Should Observe EU & German Figures
With the EU region near to political upheaval in some of its major economies, namely Italy, France and Germany, during rest of 2016 & mid-2017, traders fear another Brexit-like situation that may derail the regional economy. Though, headline PMIs from EU & Germany, on Wednesday, followed by Thursday's German Ifo Business Climate, become important for near-term EUR traders.
Observing the forecasts, except EU Services PMI which is likely printing 53.1 against 52.8 prior, all other indices may flash weaker numbers. The EU Flash Manufacturing PMI could print 53.2 versus 53.5 prior while German Manufacturing PMI is expected to show 54.8 mark versus 55.0 earlier reading. Additionally, the German Services PMI is also likely to print 54.1 mark against 54.2 prior while the German Ifo Business Climate could please readers with 110.6 figure compared to 110.5 stats.
Given the EU PMIs flash another set of downbeat figures, the on-going political threat over EU can keep dragging EUR to south while an unexpected positive reading can help recover some of its recent losses.
Japanese Inflation & New-Zealand Trade Balance Are The Left-Ones
As recent optimism in the market serving BoJ's much targeted purpose of weaker JPY, Friday's Inflation readings may give rise to a bit pullback in Japanese currency. While the Tokyo Core CPI isn't expected to change from -0.4%, the National Core CPI may please JPY traders with -0.4% mark against -0.5% prior. Given the inflation figures provide upbeat figures, chances of the USDJPY to revisit 107.50 can't be denied; however, weaker data-points can further propel the pair towards 112.00 critical resistance-mark.
At last, New-Zealand Trade Balance, on Thursday, becomes the only reading to direct NZD moves. Consensus indicate a short-fall in Trade deficit to -950M against -1436M prior, which in-turn could help the NZD to bounce towards 0.7200 area; though, disappointing figure can keep signaling the NZDUSD downturn to 0.6850-40 support-zone.
Cheers and Safe Trading,
Anil Panchal