Forex Weekly Outlook - July 17-21 2017
The US dollar was on the back foot on political and mostly monetary issues. Is this just a setback or can we expect further falls? The upcoming week features a mix of events from all over the world. Here are the highlights for the upcoming week.
Donald Trump Junior is in trouble for a meeting with a Russian lawyer and the dollar reacted. Janet Yellen expressed some concern over inflation, but kept things relatively balanced, leaving room for speculation. The inflation data was weak, and so were retail sales. The dollar suffered across the board The Canadian dollar stood out with a big jump after the BOC raised rates and sounded hawkish. The Australian dollar took advantage of upbeat Chinese data. The pound enjoyed slightly better than expected jobs report amid mixed messages from the BOE. The euro made an attempt to move higher but did not go anywhere fast.
Updates:Chinese GDP: Monday, 2:00. China is the world’s No. 2 economy. and demand from the economic giant has a huge impact on the rest of the world. The data published by the Chinese authorities are not considered very accurate but is certainly a market mover, especially for the Australian dollar. The economy expanded at an annual pace of 6.9% in Q1 2017 and a similar rate of growth is on the cards now: 6.8%. Note that China also releases industrial output, fixed asset investment, and retail sales at the same time. Nevertheless, GDP has the upper hand. UK inflation report: Tuesday, 8:30. The crash of the pound that was one of the results of Brexit is making consumer prices dearer. Britain stands out with its higher inflation among developed economies. With wage growth running below the rise in prices, standards of living are falling. The Bank of England has a lively debate about whether to raise rates or not. Headline CPI increased by 2.9% y/y and is expected to be seen again. US housing data: Wednesday, 12:30. Building permits stood at an annual pace of 1.17 million in May, while housing starts dropped to 1.09 million. The figures often surprise in different directions, offsetting each other. When they go in the same direction, they have a significant impact. Building permits are expected to rise to 1.20 million and housing starts to 1.16 million. Crude Oil inventories: Wednesday 14:30. The weekly gauge of inventories dropped sharply in the latest read, but supply is also abundant. The indicator moves the Canadian dollar but also other markets. There is an inverse correlation between the dollar and oil prices. Australian jobs report: Thursday, 1:30. Australia enjoyed a whopping jump of 42K jobs in May, way above expectations. This sent the unemployment rate down to 5.5%. Another beat could make the RBA change its mind. A more modest gain of 15.3K is projected and the unemployment rate is predicted to tick up to 5.6%. Japanese rate decision: Thursday, during the Asian session, press conference at 6:30. The Bank of Japan continues its recent policy of keeping 10 year yields around 0%. Recently it found itself intervening more and more in order to maintain its target, thus printing more money and keeping the pressure on the yen. While no change is expected in the policy driven by Kuroda, the updated assessment about the economy and especially inflation (remains very low), will be of interest. ECB rate decision: Thursday, the decision at 11:45, press conference at 12:30. In its last rate decision in June, the ECB described risks as balanced instead of as tilted to the downside. In addition, they no longer mentioned the option to lower interest rates in their forward guidance. However, there were no clear hints about tapering, they downgraded inflation forecasts and in addition, ECB President Mario Draghi expressed frustration about core inflation. Since then, that core inflation number ticked up and Draghi made his Sintra speech. There, Draghi talked about a shift from deflation to reflation and mentioned a gradual removal of the stimulus. This time, no new forecasts are on the cards but reporters and markets would like to know if the ECB will announce the beginning of the end of its bond buying scheme, currently set to expire by year end. Any optimism about inflation and growth would be euro positive, while a damp mood by the President of the Frankfurt based institution would hurt the euro. US Philly Fed Manufacturing Index: Thursday, 12:30. This indicator for the manufacturing sector is published very early: this one is for the month of July. Back in June, the figure beat expectations with 27.6 points. A slide to 23.8 is expected now. While the sector is small, it is still significant. Jobless claims are released at the same time but remain quite stable.