During last week, another dip in US Jobless Claims, coupled with upbeat Existing Home Sales and an improvement in market risk sentiment, helped the US Dollar Index (I.USDX) to register second consecutive weekly gain. However, the greenback failed to strengthen against GBP, CAD and AUD as swift in polls avoiding 'Brexit' strengthened the UK currency while rising Crude prices helped AUD and CAD to maintain their up-moves. Further, the EUR weakened against majority of its counterparts as ECB's mixed communication dragged the regional currency to south while JPY dropped heavily after the news that the BoJ is considering to offer negative-rate loans to Japanese banks. Moreover, the Crude managed to print handsome rise with the third weekly advance as dip in US inventories and hope that global oil producers will meet again in June conquered the broader supply-glut worries.
Unlike the previous week, the current week contains important economic data-points/releases that can provide busy trading schedule to market players. Amongst them, monetary policy meetings of US Federal Reserve, RBNZ and BoJ, together with GDP numbers from UK, US and Canada are likely to take the center-stage of discussion. Additionally, Inflation readings from Australia, Europe and Japan, together with US Durable Goods Orders and Consumer Confidence are some other details that could propel extra volatility into the market.
FOMC & Growth Numbers: A Must Watch To Predict Market Moves
Even if the Fed talked down policy tightening in its latest meetings, recent improvements in job details and consumer prices increases the importance of this week's monetary policy meeting by the US central banker. Moreover, Advance release of Q1 2016 GDP number, coupled with Durable Goods Orders, CB Consumer Confidence and Chicago PMI, are additional data-points that could provide meaningful information to forecast chances of the Fed's interest-rate hike.
The first estimate of US Q1 2016 GDP, due for Thursday release, will help understand how recently mixed data contributed to the world's largest economy. Market consensus reveals that the US economy grew at a meager 0.7% rate against the 1.4% in Q4 2015. Even if the growth number is likely registering slowest pace in a year, fears of recession seems blown-off and a higher than expected reading could help the US central bank in going forward with their two hikes a year plan of 2016.
Moving on, monthly releases of CB Consumer Confidence and Durable Goods Orders, to be released on Tuesday, followed by the Chicago PMI details on Friday, indicate mixed view of the USD. The official Consumer Confidence gauge is likely cutting down a bit to 95.8 against its 96.2 prior and the Chicago PMI is expected to mark 53.1 print versus 53.6 previous while the Durable Goods Orders may reverse its prior -3.0% loss with +1.9% gain with Core reading likely gaining 0.6% mark compared to -1.3% prior. Further, New and Pending Home Sales details, up for release on Monday and Wednesday respectively, also contribute to market uncertainty as the forecasts for New Home Sales indicates 521K print versus 512K prior while the Pending Home Sales expectations signal only 0.3% growth against previous rise of 3.5%.
Coming to another important release of this week's US economic calendar, Monetary Policy meeting by the FOMC, scheduled for Wednesday. Even as the central bank isn't expected to alter its present monetary policy at the meeting, market players would closely examine details of the monetary policy statement as recent improvement in data-points signal that the Fed might refrain from its previous dovish bias and could signal an interest-rate hike in the upcoming meetings or it may go a step further and indicate a meeting month where another rate-hike is most likely. Given the central bank drop its recent dovish stance, considering the improvement in data-points, or discuss details of future rate-hikes, chances of greenback's further up-move can't be denied.
UK GDP and EU Flash CPI Are Details for GBP & EUR Traders To Check
While nearness to 'Brexit' referendum kept propelling the GBP and the EUR traders' worry, recent UK visit of the US President helped ease some of the concerns for the grave departure of UK from Europe, as per the leading polls on the matter revealed. However, some of the leading UK policy makers are still of the view that the UK should leave EU and hence developments on the 'Brexit' could continue making both the nations' currency trader on edge.
On the economic data-front, first estimation of UK Q1 2016 GDP and Flash release of April EU CPI, up for announcement on Wednesday and Friday respectively, could provide important details to forecast near-term moves of GBP and EUR as monetary policy leaders of both these nations have been dovish off-late. While the UK is likely bearing the burden of 'Brexit' talks with a weaker GDP print of 0.4% against 0.6% prior, the EU Flash CPI is again expected to dip in negative territory with -0.1% mark versus its 0.0% March inflation outcome. Should the UK GDP prints a weaker number, 'Brexit' concerns would continue weighing down the GBP while another soft inflation reading from the EU could mean that the ECB isn't left with any option than to ease further, which in-turn could drag the EUR further towards south.
BoJ And RBNZ Are The Rest Of Central Bankers To Fuel Forex Liquidity
Although improvement in dairy prices, coupled with overall advance in commodity basket, have been helping the NZD off-late, the RBNZ, which previously left open the door for further monetary easing, can provide details of whether the New-Zealand currency is worth rising or not. Even if the central banker isn't expected to alter its official cash rate in Wednesday's meeting, market players would look for details that reveal threat of rising NZD to exports.
Further, the Tuesday's Trade Balance and the ANZ Business Confidence, on Friday, are some additional data-points that could help better predict near-term NZD moves. While Trade balance is likely giving positive hint for the NZD, with 405M against 339M prior, further dip in Business Confidence can give rise to the profit-booking.
Hence, a weaker signal from RBNZ, coupled with downbeat business confidence might give rise to NZD pullback while the losses might be limited with upbeat Trade Balance and additional increase in commodity prices.
If US GDP is one thing on the data-front that market players are most likely to observe, Thursday's monetary policy meeting by the Bank of Japan (BoJ) grabs the major attention when it comes to this week's central bank decisions. With the rally in JPY giving headache to export-oriented economy's leaders, recent news that the central bank is thinking to allow its banks negative-rate loans, spurred speculations that the BoJ might also discuss another rate-cut in the meeting. However, slew of headline economics, scheduled for release just ahead of the monetary policy meeting, become important for the Japanese policy makers before they announce anything. If the central bank takes a bold measure of announcing qualitative measures (like negative-rate loans) together with the signal or actual rate-cut in its benchmark interest-rate, the JPY becomes vulnerable enough to plunge. Though, strong will of the BoJ Governor with hawkish statement and no change in monetary policy becomes a trigger for the Japanese currency to reverse some of its recent losses.
Australian Inflation And Canadian GDP Are The Rest To Observe During The Busy Week
Last but not the least, Australian inflation readings (including Wednesday's CPI and Friday's PPI) and the Canadian GDP, up for Friday release, are some additional details that could add some time in market players' busy trading schedule. While Australian CPI is likely weakening to four month lows of 0.2% versus its 0.4% prior and the PPI is also expected to print 0.2% mark compared to 0.3% prior, the Canadian GDP growth may dip to -0.1% from +0.6% previous mark. Although rise in commodity prices have helped the CAD and AUD off-late, a weaker inflation and GDP prints might force their respective central bankers, namely BoC and RBA, to relinquish their neutral stance and favor further monetary easing, which in-turn signals weaker for these currencies.
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