With a six-month high US NFP, coupled with upbeat Non-Manufacturing PMI, again alleviating concern about the strength of the world's largest economy, the US Dollar Index (I.USDX) ignored not-so-okay FOMC meeting minute details and printed third weekly positive closing. The Euro remained mostly downside with pessimism emanating from EU-UK future while disappointing data-points dragged the GBP further towards south. Moving on, RBA's no rate-change helped the AUD register across the board gains and the NZD also maintained its north-run while the CAD dipped due to weaker Crude prices. Additionally, JPY and Gold held their rally intact as macro uncertainty kept pushing market players towards safe-havens.
During early weekdays, soft Chinese inflation numbers triggered a bit of pullback in AUD and NZD prices while a strong victory by Japanese Prime Minister, Shinzo Abe, at upper house election favored continuation of BoJ's monetary easing, which he also promised during early Monday, and pulled the JPY a bit back.
Looking at the upcoming week, monetary policy meetings by the Bank of England (BoE) and the Bank of Canada (BoC), together with inflation numbers from US & EU and the Australian Job numbers are likely to offer additional volatility to the world's largest financial market, Forex. Let's briefly examine each of them.
US Inflation Numbers To Determine Near-Term USD Moves
Even if the June month NFP smashed the pessimism spread by previous reading, an unwelcomed print of Unemployment and a weaker than expected Earnings growth still pulls back forecasters from expecting a strong cue relating to Fed rate-hike. Though, headline inflation numbers, up for Friday, become important for the greenback traders which, if spreading optimism triggered by recent payroll print, might provide additional force on the FOMC members to turn hawkish.
Not only did the NFP print downbeat marks during its previous reading but the CPI also softened from 1.1% to 1.0% (YoY) in May 2016 while Core number held up to 2.2% from 2.1% prior. On a monthly basis, the CPI dipped from 0.4% to 0.2% while the Core CPI grew with constant 0.2% growth. Forecasts suggests that the Friday's CPI might also please the USD traders with yearly figures of CPI & Core CPI likely to show 1.1% & 2.3% growth numbers and the monthly stats might remain unchanged at 0.2% for both the measures.
Further, Retail Sales and Core Retail Sales, another consumer-centric to witness on Friday, may not be able to hold the CPI-driven happiness if they match soft predictions. The Retail Sales growth is likely slowed down to 0.1% from 0.5% prior and the Core Retail Sales may hold 0.4% expansion rate for one more time.
Other than the aforementioned details, monthly readings of PPI, on Thursday, followed by Empire State Manufacturing and Prelim UoM Consumer Sentiment, up for Friday, are some additional data-points that the USD traders should be aware of. While PPI and the Empire State Manufacturing are both likely to soften from their previous readings of 0.4% and 6.0 to 0.3% and 5.1 respectively, the Consumer Sentiment gauge might counter the pessimism with 93.7 mark as compared to the downwardly revised prior to 93.5.
While soft manufacturing & PPI numbers could force the USD Bulls' halt, strong consumer-centric numbers, like CPI, Consumer Sentiment and Retail Sales, might further accelerate the US Dollar's upward trajectory on the expected rate-hike concerns.
BoE & EU CPI To Be Observed By GBP And EUR Traders Respectively
Thursday's Bank of England (BoE) meeting becomes crucial for the GBP trader as the Britain's vote to leave the EU has ultimately forced the UK central bank to break its seven year silence on rate-front with a 0.25% rate-cut in its official bank-rate from 0.5%. The BoE Governor, Mark Carney, has already communicated the bank's intention to announce monetary easing in order to safe-guard the economy from Brexit drags. In addition to a rate-cut, market speculations also favor an increase in central bank's 375 billion-pound bond-buying program and a dovish statement from the MPC committee.
At the EU front, final reading of the CPI, on Friday, becomes the only reading to observe for the EUR traders. The final confirmation of headline EU Inflation is likely to match 0.1% flash reading and might not endanger the regional currency if meeting the consensus. However, news from the on-going EU summit might of interest for the EUR traders.
Although the BoE is almost certain to cut its benchmark rate, a slightly hawkish rate statement, coupled with no alteration on the bond-buying program can trigger the GBP pullback. Further, any welcome changes at the EU-UK discussion front, together with an upbeat EU CPI, might also help the GBP & EUR respectively.
BoC, AU Jobs And Chinese GDP & Industrial Production Are The Rest
Canadian central bank, the Bank of Canada (BoC), is scheduled for its monetary policy meeting on Wednesday, where it is less likely to alter its present policy measures; however, comments by the Governor and the rate-statement will be closely observed. Given the BoC Governor expresses threat from Brexit and recent declines in Crude prices, Canada's main export, chances of further weakness by the Canadian Dollar (CAD) can't be denied.
The Australian Bureau of Statistics is up for releasing its monthly job statement on Thursday with an expected three month high of Unemployment rate of 5.8% and 10.1K of Employment Change, which is lesser than the previous 17.9K. China, world's largest commodity user, is scheduled for releasing its quarterly GDP number and a monthly reading of Industrial Production on Friday. Both the headline economics are likely to portray weakness of the world's second largest economy, as the GDP might show 6.6% growth compared to 6.7% prior while the Industrial Production hike might soften to 5.9% from 6.0% previous mark. While a hung parliament and weaker job numbers indicate AUD's downturn, downbeat Chinese stats can activate fresh selling of commodity currencies, like AUD, NZD and CAD.
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