Fundamental Analysis by Admiral Markets

[Admiral Markets]

Crucial Releases To Keep Forex Traders Busy

Offbeat US economics continue fading expectations that the Federal Reserve could express concern for interest rate hike sooner, pulling back the US Dollar Index (I.USDX) to register consecutive second weekly decline. The Euro, even after again witnessing failed talks between Greece and its creditors, managed to gain as ZEW Economic Sentiment and German readings surpassed expectations. Further, commodity currencies, mainly AUD, NZD and CAD, remained a bit on the upside with fresh announcement of Chinese stimulus and an extended pullback in commodity prices. Moreover, Crude Oil prices maintained gains with stretched geo-political tension in Yemen, coupled with signs of decline in US shale output, spread concerns for supply disruptions.

Going forward, the current week has many important readings/events on the cards that could continue making forex traders busy. Amongst them, quarterly GDP data from the UK and the US along with three major central bank monetary policy decisions, namely FOMC, BoJ and RBNZ, could help investors determine the near-term direction in the Forex market.

US FOMC and Advance GDP q/q Could Create Headlines

Monetary Policy meeting by the Federal Reserve, scheduled for Wednesday, is an undisputed crucial event of the week where market players will continue seeking hints for the near-term interest rate hike; however, absence of press conference by the Fed Chair, generally following the rate announcement, could dilute the event’s importance. Although, downbeat economics continue restricting the FOMC from signaling accurate timelines for the interest rate hike, needless to say a surprise alteration in benchmark interest rate, some of the FOMC members are split over the view and could communicate the same to fuel USD strength.

Advance reading for the Q1 2015 GDP, scheduled also on Wednesday, becomes another important detail for the Forex market to observe. Consensus supports another disappointing print of US GDP, only a 1.0% gain, after the number witnessed 2.2% growth in Q4 2014 against noting the 5.0% gain in Q3 2014. Considering the plunge in headline economic numbers, it is more likely that the GDP print could either match the forecast or miss the mark and provide another lag of decline to the USD.

US GDP Q/Q

Other than the headline numbers, CB Consumer Confidence, scheduled for Tuesday, Pending Home Sales on Wednesday, Chicago PMI, schedule to release on Thursday, and the ISM Manufacturing PMI, on Friday release, are some of the additional details that could provide meaningful information to determine near-term USD moves. While Consumer Confidence and the Manufacturing PMIs are signaling an improvements from their prior releases, Pending Home Sales could register a lower than previous growth number.

To sum up, recent flow of negative economics may restrict the FOMC from conveying near-term interest rate hike, providing additional support to the USD bears; however, surprise majority of FOMC hawks could provide considerable strength to the greenback. Further, better than expected gains in the Q1 2015 GDP number may provide strong support to these hawkish policy makers to announce interest rate hike sooner than expected, that in-turn could provide noticeable USD gains.

Euro-zone CPI, UK GDP, Chinese PMIs, RBNZ And BoJ Are Other Events to Watch For

Rest of the global economic calendar is also busy during the week with Flash reading of Euro-zone CPI, Preliminary Q1 2015 GDP from UK, monetary policy meetings by the Bank of Japan (BoJ) and the Reserve Bank of New Zealand (RBNZ) providing important information to fuel the forex market.

Flash version of Euro-zone CPI, scheduled for release on Thursday, is an important reading to see whether the QE is paying expected benefits or not. The number is likely testing five month high, to 0.0%, and could help the ECB feel satisfied with the stop in deflation. However, German Prelim CPI m/m, scheduled for Wednesday, is expected to print a negative reading and could provide a bit of Euro decline before the regional currency enjoys Euro-zone CPI reading. Hence, a stronger than expected reading of Euro-zone CPI could support the Euro to extend its recent gains; however, a consecutive decline in the numbers is less likely to provide additional damages to the regional currency, unless there are sharp negatives, as ECB is less likely to add more easing on its QE.

Preliminary reading of Q1 2015 UK GDP, scheduled for Tuesday release, and the Manufacturing PMI, scheduled for release on Friday, are important information from Britain to determine near-term GBP moves. While the GDP reading is expected to print a bit softer number, to 0.5% against the upwardly revised previous release of 0.6%, the Manufacturing PMI is likely printing a mild improvement, to 54.6 from 54.4, in manufacturing activity. As there prevail minor differences between the forecast and prior readings, actual numbers meeting the consensus are less likely to reveal much of the GBP strength; however, should the GDP reading surpasses its previous reading it can force the BoE to spell for monetary policy tightening and can help the UK currency witness considerable up-move.

Official readings of Manufacturing and Non-manufacturing PMIs from China, scheduled for release on Friday, are important details to determine near-term strength of commodity currencies. While the Manufacturing PMI is likely to continue printing an above 50 reading, a plunge into the Non-Manufacturing PMI below 53.7 could reveal the weakness dragon nation. Moreover, a below 50 print for the Manufacturing PMI from the world’s largest industrial player is likely to witness loud repercussions and can drag the recent gains of AUD, CAD and NZD.

Monetary policy meetings of the RBNZ and the BoJ, scheduled for Wednesday and Thursday respectively, are less likely to result in altering their current monetary policies. However, comments from the BoJ Governor, in press conference following the meeting, are likely to be closely scrutinized to see if the central bank continues to show willingness to expand its economic stimulus measures further. Should the RBNZ provides a surprise hike in interest rate, that could be strongly positive for the NZD while an optimistic comment from BoJ can become strong support for the JPY to extend its gains.

With an on-going correction in US Dollar, backed by dismal economic readings, only a stronger than expected US GDP could reverse recent losses by the greenback. On a broader view, with multiple releases from major economies on cards, the upcoming week is likely being crucial to determine near-term Forex market moves.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Central Bankers Fueled Forex Market Volatility

Major Central bankers, including Federal Reserve, Bank of Japan (BoJ) and the Reserve Bank of New Zealand (RBNZ), rattled the Forex market during late Wednesday and on Thursday as well. While all three central banks refrained from altering current monetary policies, the BoJ trimmed its inflation forecast, the RBNZ played dovish tune and the Fed kept playing with words to signal that they are capable enough to meet the inflation target and chances of an interest rate hike during the later part of the year can’t be denied.

FOMC And The GDP Provided Additional USD Weakness

With headline economic details already forcing the greenback to liquidate nearly 4% of its gain during the month of April, Advance reading of Q1 2015 GDP that grew at a least pace in a year, with 0.2% number, against 2.2% final reading of Q4 2014 GDP, provided additional slump to the USD; however, the greenback recovered a bit during its FOMC trading when the monetary policy committee (MPC) signaled chances of meeting its 2.0% target inflation and increasing benchmark interest rate during the later part of the year. The US Dollar, then restored its decline on Thursday when market players perceived the inability on the part of the FOMC to meet its promises of an interest rate hike.

Looking from the broader perspective the GDP reading grew at a least pace in a year, with 0.2% number and the FOMC did say that the current scenario restricts the monetary policy committee (MPC) from altering their current monetary policy. However, digging deeper into details, give meaningful information to determine the near-term USD moves.

US GDP Q/Q

The US GDP grew lesser than the expected and with the least pace in a year, but bad weather conditions coupled with the stronger USD, that hindered US export market, could be tackled soon and the US GDP is likely meeting their forecast of growing between 2.1% to 3.1% during the current year. Hence, even if the broader reading was disappointing, it isn’t showing a closure to optimism and hence the upcoming, second and the third (final), revisions to the reading are more important to gauge the actual growth figure.

Moving towards the FOMC, the policy makers said “economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed.” However, these reasons of hindering the chances of interest rate hike are being mitigated in the later part of communication where the MPC said “The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term”.

So, the FOMC, in its meeting on Wednesday, did spell negatives that are currently restricting monetary policy change; however, they are optimistic enough to beat these obstacles and enacting the interest rate hike during the later part of the year that in-turn isn’t restricting the market expectations of June or September hike.

However, looking at the thrust of economics, lesser chances support the FOMC optimism and it seems that they have only played with words to avoid spreading too much of pessimism and only a continuous flow of improvement in Inflation and labor market details could give them opportunity to increase the benchmark interest rate for the first time since 2006.

To sum up, the USD is reflecting weaker economics and is likely to continue doing so unless there are consecutive positive details, either relating to labor markets or Inflation, that could pave the way for the interest rate hike sooner than later.

RBNZ and the BoJ Moves

Alike Fed, the RBNZ and the Bank of Japan also stood pat with their current monetary policies; however, dovish tone of RBNZ Governor, Graeme Wheeler, and the cut in inflation forecast by the bank of Japan provided meaningful information to understand NZD and JPY moves.

RBNZ, took place late Wednesday, held its official cash rate (OCR) at 3.5% and changed the bias from the neutral, which supports probably a hike in interest rate or a cut, depending upon the economic releases, to the one that supports a cut in OCR should the situation demands. The central bank Governor said "It would be appropriate to lower the OCR [official cash rate] if demand weakens and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target." Moreover, he also said that the NZD is unjustifiably high and hinders the export demand, the main driver for Kiwi economy, supporting more of the weaker side of the NZD. The Kiwi, as the New Zealand Dollar (NZD) is sometimes termed, provide stiff response to the meeting’s outcome and plunged nearly 2.0% in its post meeting trading sessions.

As the chances of an interest rate, that were present until now, are being denied by the RBNZ head, with the dovish comments, it can be expected that the NZD should behave negatively unless there are strong economic numbers or the central bank reiterates the wording that again supports the hawks.

Bank of Japan maintained its monetary policy intact with 80 Trillion Yuan’s yearly monetary easing target and refrained from introducing additional monetary measures. However, the central banker cut its forecast for meeting 2.0% inflation target from current fiscal year to April-September 2016. It also cut its core consumer inflation forecast, for current fiscal year, to 0.8% from 1.0% in its twice-yearly review of its forecasts. Moreover, the central bank Governor, Haruhiko Kuroda, sounded positive in his approach to economic growth, supported by the rise in export numbers, and the trend inflation, which might help pushing the main inflation higher. The JPY provided cold response to the meeting outcome as the central bank governor sound more optimistic and helped balance the pessimism spread by inflation forecast.

Hence, the BoJ, even if altering the inflation forecast, couldn’t provide much of the weakness to presently strong JPY and looking at the Japanese economics the Yen could become a sound contestant to witness near-term strength, unless there are drastic negatives from economy.

Other than these central bankers, the Central Bank of Russia also cut down its bench market interest rate by 1.5% to 12.5% from 14.0% on Thursday. The 150 basis point cut in the Russian bench mark interest rate is a third this year after the plunge in Crude oil prices and the geo-political tensions with Ukraine damaged Russian economy in a bitter way.

Shifting towards uncertainty at Greece and UK, it can be sensed that the Greece has repeatedly failed to meet the EU criterion and is supporting the chances of Grexit should it fails in its May 11 meeting. Given the troubled nation’s inability to meet the creditors’ demand, it could pose serious threat to the Euro, that is currently trading positively, mainly surrounded by the positive comments from Greek officials . The UK economy, which would face its general election on May 07, is also facing the uncertainty as no party is gaining clear majority in opinion polls. Should the actual outcome of the election matches the opinion polls, uncertainty surrounding the economic policies could drag near-term up-move of the GBP.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Labor Market Details To Play Crucial Role This Week

Last week, the US Dollar Index (I.USDX) registered its consecutive third weekly decline as disappointing US economics, coupled with not-so-hawkish FOMC, continued shadowing the expectations concerning near-term interest rate hike. The EURUSD secured highest gains in seven weeks as market players expect ECB’s QE is paying out the troubled region with improved economics and could help avoid the deflation soon. Further, uncertainty ahead of the UK general election, coupled with weaker GDP and Manufacturing PMI, pulled back the GBP gains while dovish comments during recent monetary policy meetings of the BoJ and the RBNZ, in addition to the downgraded inflation forecast by the BoJ, hurt currencies of Japan and New Zealand. Moreover, speculations concerning the cut in benchmark interest rate by the RBA strengthened during last week, on the back of lingering Chinese economics, and damaged the Australian Dollar.

During the first full week of May, labor market details from US, Australia and the New Zealand are likely to fuel considerable volatility in the forex market. Moreover, monetary policy meeting by the Reserve Bank of Australia (RBA), Chinese Inflation and Trade details together with the UK Trade Balance and Construction and Services PMIs, are some of the crucial events that could provide busy days to the Forex market participants. There isn’t any important announcement out of the Euro-zone except the on-going efforts of the Greek government to please international creditors to avail emergency funds ahead of its May 11 meeting.

NFP to Rule This Week’s US Economic Calendar

Even if the monthly reading of Factory Orders, scheduled for Monday, and the ISM Non-Manufacturing PMI, scheduled for Tuesday, could reveal important details about the world’s largest economy, Friday’s NFP and Unemployment Rate for the month of April, also the ADP Non-Farm Employment Change, scheduled for Wednesday, are crucial releases to help determine the chances of Fed’s near-term interest rate hike.

As said earlier, the US labor market details have played a crucial role in determining the future monetary policy actions by the Federal Reserve and hence will be important for the Forex market players to determine near-term USD moves. Having registered the lowest reading in more than a year, the 126K mark, in its March announcement, the US NFP is likely to reimburse its previous losses and could print a 231K number, coupled with the lowest unemployment rate since May 2008, to 5.4%. Moreover, the ADP also signals an improvement from its previous 189K to 192K in its Wednesday’s announcement. Considering the recent improvement in quarterly wage detail, released last week, a healthy print of these employment details signals toward improved US fundamentals and a near interest rate hike by the Federal Reserve.

US NFP and Unemployment Rate

Source: TRADING ECONOMICS | 300.000 INDICATORS FROM 196 COUNTRIES​

Factory Orders’ detail is likely to reveal the highest order growth since September 2014, by printing 2.1% number, against its previous reading of 0.2% which was the first positive number in six months, while the ISM Non-Manufacturing PMI is likely to print a bit softer number, to 56.2 against 56.5 prior. Moreover, weekly Jobless Claims is also expected to print a hard number of 275K as compared to its previous reading of 262K.

Given the headline employment details’ ability to match the consensus, together with the improvement in Factory Orders, pessimism surrounded by the recent weakness in US economics can be countered and the FOMC becomes more likely to practice an interest rate hike sooner than expected, that in-turn could trigger considerable US Dollar advance.

Other than the US employment details, numbers from the New Zealand and Australian labor markets, scheduled for announce on Tuesday and Thursday respectively, are also likely to provide meaningful information to determine near-term moves of both these antipodean currencies. The New Zealand Employment Change is likely to soften a bit to 0.8% from its prior release of 1.2% while the Unemployment Rate is expected to shrink to 5.5% after rallying to the 5.7% previously. Moreover, the Australian Employment Change is expected to print the lowest reading in three month, to 4000 against previous addition of 37,700, and the Unemployment Rate could increase a bit to 6.2% after releasing 6.1% level previously. With the recent dovish tone of the RBNZ, weaker labor market numbers from New Zealand could magnify the NZD losses while the AUD is likely to witness considerable downside should the employment details match consensus.

Monetary policy meeting by the Reserve Bank of Australia (RBA), scheduled for Tuesday, is also an important event to determine near-term AUD moves in addition to the labor market numbers. The RBA avoided cutting down its benchmark interest rate in April meeting and fueled the AUD; however, with the pessimistic outlook for China, Australia’s largest trading partner, the central banker is more forced to introduce another interest rate cut in order to sustain the economic growth. Other than the rate decision, quarterly economic forecast, to be made public during next week, could also provide meaningful information relating to central banker’s overview of the economy. The bank did downgrade its economic outlook in its recent monetary policy and a reflection of the same in quarterly report could provide considerable downside to the AUD. Should the central banker avoid cutting down the interest rate, asking for some more time to reflect on weaker Chinese details, the AUD is likely to witness a knee-jerk up-move, followed by the stronger decline, while a cut in the benchmark interest rate could magnify the AUD decline.

Having witnessed weaker reading of HSBC Final Manufacturing PMI, details relating to Chinese Trade Balance and inflation numbers, scheduled for Friday and Saturday respectively, become important to foresee the moves of AUD, CAD and NZD. After plunging during the month of March, to 3.1B, Chinese Trade Balance is expected to print 34.5 billion of Trade surplus for the month of April. Moreover, consensus relating to the CPI reveals that the inflation fuelled by 1.6% against its previous reading of 1.4%. With the Chinese central bank rolling its sleeves to do whatever it takes to fasten the economy, weaker readings could again force the central banker to announce additional measures, avoiding the recent ones introduced in previous week. Hence, weaker readings out of China is likely to provide additional drag to the commodity currencies; however, readiness on the part of Chinese central bank to fuel the economy could lessen this damage in expectation of more easing.

UK Economics And The General Election

UK PMI details, namely the Construction PMI and the Services PMI, scheduled for release on Tuesday and Wednesday respectively, together with the UK Trade Balance, schedule to release on Friday, are likely important details to help determine near-term GBP moves. Both these PMIs are likely signaling a weaker reading as compared to their previous releases. While the Construction PMI could print a 57.6 against 57.8 number, the Services PMI, important to determine UK GDP, is likely soften to 58.6 against its 58.9 prior release. Moreover, the Trade Balance is expected to reveal improved trade deficit to -9.8B against 10.3B.

Other than the economic details, the UK General Election, to be held on May 07, becomes an important event to foresee moves of UK currency. Opinion polls ahead of the election continue supporting the coalition government and an uncertain political environment. Given the actual economic readings meet market expectations, and the election outcome matches opinion poll, it could become a strong deterrent factor for the GBP as the coalition government could be failed to support the UK economy.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Global Economic Releases To Drive The Forex Market

Even if the US Dollar recovered during late Friday, mainly driven by the above 200K NFP and near seven year low of Unemployment Rate, the greenback remained subdued on a weekly basis as downward revision to March month NFP, coupled with softer than expected wage growth and larger Trade Deficit, seem raising bars for the Fed to hike interest rate sooner. The US Dollar Index registered consecutive fourth weekly decline while the greenback’s losses against Euro remained restricted as optimistic EU growth forecasts and better than consensus economics failed to counter pessimism surrounded by expectations of another stalled talks between Greece and its international creditors during Monday’s Eurogroup meeting. GBP was a clear winner after the ruling conservative party, lead by David Cameron, won 2015 general election by surpassing the pre-election polls with 330 seats while nine month high UK Services PMI provided additional fuel to the UK currency. Moreover, the Australian Dollar, even after witnessing the rate cut by the RBA, recovered a bit as possibilities of further interest rate got mitigated and the fresh stimulus from China kept supporting the Aussie against majority of its counterparts.

Having witnessed third attempt in a year by the Chinese central bank to further ease their monetary policy, on Sunday, current week offers many important events for the forex market players to observe. Though, the current week’s economic calendar is lighter that the previous week, the BoE Inflation Report and UK labor market details, Euro-zone GDP, RBNZ Financial Stability report and US Retail Sales, Empire State Manufacturing and Preliminary reading of UoM Consumer Sentiment, are key events to determine near-term forex moves.

Lighter But Important US Economic Calendar

With the decent rise in NFP, surpassing 200K again, and the near seven year lows of Unemployment Rate at 5.4%, market players are likely to closely examine US economic details to foresee chances of interest rate alternation by the Federal Reserve. Moreover, weakness into the growth numbers also pushes investors toward this week’s important details to predict US growth and inflation scenario, another important component that could force the Fed to fuel interest rates for the first time since 2006 sooner than later.

Monthly reading of Retail Sales and preliminary UoM Consumer Sentiment, scheduled for Wednesday and Friday respectively, are key details to examine US economic progress at a micro level. Although, the Retail Sales are likely revealing slower than previous growth in sales, to 0.3% against 0.9%, the consumer sentiment index could print a four month high of 96.5 against 95.9 registered earlier. Further, PPI and the Empire State Manufacturing Index, scheduled to release on Thursday and Friday respectively, are also showing mixed expectations as the PPI could print 0.1% after reversing four month declines in its previous announcement to 0.2%, while the gauge of manufacturing is expected to reverse its -1.2 print by revealing 5.9 number.

After recent labor market details clouded its March pessimism, expectations concerning earlier interest rate hike could strengthen; however, rise in Retail Sales and manufacturing gauge, coupled with improvement in consumer sentiment, may provide additional strength to the greenback traders who foresee such move sooner and supports considerable US Dollar rally.

UK Details To Take The Center Stage of Forex Market

Last week’s electoral victory by the ruling UK party fueled the GBP towards testing four month high against its US counterparts as speculations concerning extended pro-GBP policies spread optimism amongst UK currency traders. Moreover, nine month high Services PMI is likely to become a reason for the BoE Governor to become hawkish in his speech during Quarterly Inflation Report (QIR) announcement, on Wednesday.

GDP and Inflation Projection Based On Market Interest Rate Expectations And £375 Billion Purchased Assets

Source: Bank of England - Home | Bank of England​

The Bank of England, that maintained its status-quo monetary policy during Monday’s MPC meeting, avoided supporting the interest rate hike during its February meeting, signaling that the recent decline in inflation reading could hinder the path of future interest rate hike should it stretch a bit longer; however, it remained a bit firm for its growth expectations. The UK central bank is expected to update its forward guidance on interest rates during the same announcement on Wednesday and a downward revision to growth/ inflation numbers or interest rate forecast and/or hawkish comments by the BoE Governor, in his speech following the announcement, could pullback recent gains by the GBP. Considering the recent victory of ruling party, that supports extended beneficial policies for the GBP, chances are higher that the BoE Governor spread hawkish words and fuels the near-term GBP rally; however, decline in GDP reading coupled with weaker inflation reading, could restrict the BoE to upgrade its inflation forecasts in QIR and can drag the GBP rally. Hence, it would be better to closely examine the details of announcement to determine the chances of BoE’s interest rate hike and the future course of GBP.

Other than the QIR, monthly details of UK Manufacturing Production and the latest batch of employment figures, mainly the Unemployment Rate and Average Earnings, scheduled for Tuesday and Wednesday respectively, will also provide key details to determine near-term GBP moves. The Manufacturing Production is expected to slow a bit to 0.3% from 0.4% while Unemployment Rate is likely to continue drifting lower towards testing lowest level since September 2008 by printing 5.5% number against previous release of 5.6%. The Average Earnings are likely to remain intact with 1.7% growth and the Claimant Count Change could register a bit of improvement by showing -20.1K against previous release of -20.7K. With the labor market details continue showing considerable improvements, chances are higher that the GBP could extend its recent gains should the actual results meets consensus; moreover, the industrial production could limit the GBP advance given the number plunges below expectations.

Flash estimations of Q1 2015 Euro-Zone GDP, scheduled for Wednesday release, is the only release from Euro-zone to help determine near-term Euro moves. The growth number is expected to rally towards highest level since May 2011 by printing 0.5% reading against its previous reading of 0.3%. Recent flow of better-than-expected economics from the Euro-zone could become a reason for the GDP to follow estimates and fuel near-term Euro rally; however, progress on talks between the Greece and its international creditors during the Eurogroup meeting, starting from Monday, could become important to better foresee Euro moves.

RBNZ Financial Stability Report, the bi-annual publication by the New-Zealand central bank, scheduled for Tuesday, is an important release to forecast immediate NZD moves. The RBNZ Governor, in latest monetary policy meeting, talked down the need of interest rate hike and rather spread dovish words to pullback the NZD. Should the Governor continue observing his dovish tone, in his speech following the report announcement, the NZD could head for additional southward trading; however, a neutral or positive remarks are likely to again fuel the NZD.

Last but not the least, Chinese Industrial Production, scheduled for release on Wednesday, becomes an important detail to forecast chances of further easing by the Chinese central bank that said during its Sunday announcement that further easing can’t be denied. The forecasts are optimistic that signals the Chinese Industrial production to rally by 6.1% against previous reading of 5.6%, that was lowest since March 2009. Should the actual reading plunges below the previous reading, chances are higher that the Chinese Central bank again practices any of the monetary policy easing methods to pump their economy. Even if the immediate impact of the weaker release could pullback commodity currencies, NZD, CAD and AUD, expectations concerning additional stimulus and higher demand by the world’s industrial power house could provide a bit of strength to these currencies.


“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Important Releases To Keep Forex Market Busy

Last week, lukewarm US monthly retail sales data and falling consumer sentiment raised concerns over the pace of economic recovery in the world's largest economy and dispelled fears that the Federal Reserve would raise interest rates soon. Meanwhile, the Empire State Manufacturing Index showed improving manufacturing conditions but fell short of consensus estimates. The disappointing data flow continued exerting pressure on the US Dollar, which depreciated against most major currencies with the overall US Dollar Index (I.USDX) weakening for a fifth consecutive week.

Going forward, this week's RBA, BoE and FOMC monetary policy meeting minutes and BoJ monetary policy statement along-with other economic releases will dictate sentiment in the Forex market.

US Economic Releases and FOMC Meeting Minutes

From US economic calendar, housing market data accompanied with a regional manufacturing index and the minutes from the Federal Reserve's last meeting are the key highlights and would determine this week's direction for the US Dollar. Data from US housing market begins with the release of government reports on building permits and housing starts for the month of April, scheduled for release on Tuesday. Economists expect the building permits to hold steady above the 1.0 million mark and print 1.06 million units annualized rate. Meanwhile, housing starts are also expected to reclaim 1.0 million mark and show a reading of 1.02 million units. Also this week's housing data features the release of existing home sales data, scheduled on Thursday. After reclaiming the 5.0 million units mark in March, existing home sales data for the month of April are expected to continue climbing higher and come-in at an annualized rate of 5.23 million units.

The minutes from the Federal Reserve's latest meeting in April is scheduled for release on Wednesday. On the back of recent weak economic data, the minutes might continue raising concerns over the pace of economic recovery. The minutes could also provide some clarity over the prospects of any near-term rate hike. Hence, market participants are expecting the minutes to be the main driver for this week's US Dollar movement.

Source: US Department of Labor, Bureau of Labor Statistics​

Apart from the US housing market data and FOMC meeting minutes investors will confront the latest print on US headline inflation data, consumer price inflation (CPI), for the month of April, which is scheduled for release on Friday. After printing a modest rise of 0.2% for two consecutive months, in-line with consensus estimates, economists are expecting April reading to rise by 0.1% on a month-on-month basis. Excluding the volatile food and energy prices, the Core CPI figure is expected to register a rise of 0.2%. Investors will also have glimpse of US manufacturing sector from this week's Philly Fed Manufacturing Index May, which is scheduled for release on Thursday and is expected to show improving manufacturing conditions by printing 8.3 as compared to a reading of 7.5 for April.

Market is likely to have already priced-in the recent dismal US economic data and also seems to have turned cautious on the US Dollar. Should the FOMC minutes also reflect additional risk to the US economic recovery, thus scaling back the prospects of an interest rate hike, it would in-turn pave way for extending the near-term corrective move for the US Dollar.

UK CPI, Retail Sales and BoE Minutes
From the UK, market participants will keep a close watch on the inflation and monthly retail sales data. This accompanied with the minutes from BoE's latest monetary policy meeting is likely to infuse some volatility in GBP pairs. Last week BoE's quarterly inflation report painted a more pessimistic picture of the UK economy as the central bank scaled back its growth forecasts in the years ahead. The central bank, however, said that it remains on track to normalize its monetary policy by raising interest rates in the middle of 2016 as it expected the annual inflation to move back towards its 2% target by 2017. In March, UK CPI remained at 0% for second consecutive month and is expected to remain flat at 0% in April too.

The upcoming release of UK retail sales data for the month of April is scheduled for release on Thursday. In the month of March the indicator registered a decline of 0.5% against the consensus estimate for a rise of 0.4%. Consumer spending, which remains supportive pillar of UK's economic recovery, is expected to show improvement in April by posting a gain of 0.4% on a month-on-month basis.

Meanwhile, the minutes from BoE's latest policy meeting is unlikely to show any change in the number of MPC members showing willingness to raise benchmark interest rates. However, since BoE has already hinted towards normalizing the monetary policy somewhere in the middle of 2016, the minutes are unlikely to trigger any directional move for GBP pairs.

Euro-Zone PMI Data
From the Euro-zone, investors will be particularly focusing on the release of manufacturing and services PMI readings from Euro-zone's two largest economies, Germany and France, the broader Euro-zone PMI for the month of May, scheduled for release on Thursday. The German manufacturing and services PMI figure are expected to show continuous expansion, but at a slightly slower pace. French manufacturing PMI is expected to remain in contraction territory while services PMI is expected to continue showing expansion. The overall Euro-zone PMI data is expected to show activity in both manufacturing and services sectors expanding at a slightly slower pace than recorded in the previous month.

Meanwhile, analysts continue expecting Euro-zone inflation to remain subdued with April CPI, scheduled for release on Tuesday, expected to remain flat on a year-on-year basis. Other key economic release featuring this week's Euro-zone economic calendar features the release of German ZEW economic sentiment and Ifo business climate for the month of May, scheduled for release on Tuesday and Friday respectively.

Following a descent recovery in EURUSD from multi-year lows, near-term dips are likely to be bought into on the back of expected improvement in this week's PMI figures, thus helping the pair to extend its near-term recovery.

Japanese GDP and BoJ Monetary Policy Decision

Elsewhere, this week's BoJ's monetary policy decision, scheduled to be announced on Friday is likely to prove a non-event for the Forex market. However, market player would be keen to see BoJ's evaluation of the latest economic conditions following the release of GDP data for the first-quarter of 2015, which is scheduled for release on Tuesday. The Preliminary release of the first quarter economic growth is expected to match the final GDP print of 0.4% for Q4 of 2014. Divergence from the expected reading is likely to have an immediate effect on JPY pairs.

RBA Minutes and Chinese PMI Data

Economic releases that could impact movement for AUD pairs includes the release of minutes from RBA's monetary policy meeting held in May, when it decided to cut its benchmark interest rates and is scheduled on Tuesday. Also, being Australia's largest trading partner, the flash version of HSBC's Chinese manufacturing data for the month of May, scheduled for release on Thursday, will also be of importance for some meaningful movement in AUD pairs. The minutes would be looked for extending further support for AUD, which rose even after the RBA rate cut announcement but downplayed the likelihood of any further easing in the near-term. Meanwhile, the flash version of HSBC's Chinese manufacturing data for the month of May will be closely watched to gauge the economic health of the world's second-largest economy. The PMI data is expected to continue printing below 50 reading, indicating contraction in manufacturing activity. Improvement in the Chinese manufacturing activity or even a release that matches consensus forecast is likely to boost the near-term demand for AUD.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Can US GDP Help Greenback Extend Last Week's Rally?

Successful readings of Building Permits and Housing Starts, which rallied to more than seven year highs, triggered US Dollar up-move during the early days of last week. The greenback up-move stalled on Wednesday and Thursday when FOMC minutes cut down the chances of June hike while market players again favored the greenback rally on Friday when Core Inflation printed highest level since January 2013, fueling the US Dollar index (I.USDX) to disturb five weeks of decline. Moreover, hawkish tone of the Fed Chair, Janet Yellen, in her speech at Providence, Rhode Island, also backed speculations that the Fed will continue looking for a rate hike during 2015 and gave enough of reasons to the market players for supporting the US Dollar index towards testing three week high. The Euro region currency remained weaker as Greece again failed to convince its international creditors and is running out of cash to repay about 300 million Euros ($330 million) to the IMF during early June. The GBP had a mixed trading week as considerable improvement in Retail Sales countered negative Inflation reading while the JPY weakened noticeable losses, even after hawkish tone of the BoJ, as improvement in USD hurt safe haven demand of the Japanese currency.

Recent up-tick in US Dollar causes market players to await important US details, mainly the second estimate of US Q1 2015 GDP, Durable Goods Orders and Consumer Confidence, in order to confirm the greenback up-move. Moreover, monetary policy meeting by the Bank of Canada (BoC), GDP numbers from UK, Canada and Switzerland and the BoJ monetary policy meeting minutes, are some of the important details to fuel forex volatility during the current holiday shortened week. It should also be noted that the European economic calendar is almost empty, with only Wednesday's GfK German Consumer Climate, during the current week and could push the market players towards Ex-European details.

US Data Points To Gain Market Attention

Alike major global markets, US market is also close on Monday; however, monthly details of Durable Goods Orders m/m and CB Consumer Confidence, scheduled for Tuesday, coupled with the New and Pending Home Sales, scheduled for release on Tuesday and Thursday respectively, are likely to provide meaningful insights to determine near-term USD moves. However, second estimation of Q1 2015 US GDP, scheduled for Friday, is likely to gain major market attention to foresee chances of Fed rate hike and USD trend in-turn.

Recent downticks in US growth numbers put pressure on the Federal Reserve to avoid being too hawkish about the world's largest economy. The advance reading of Q1 2015 GDP, the first estimation, also lagged behind its consensus and printed the lowest number, 0.2%, in previous three quarters. Market consensus favor magnified effect of bad weather conditions and expects the reading to plunge negative, to -0.9%. Should the actual figure match forecasts, it would be the least in a year and could wane the recent optimism amongst Fed policy makers. Alternatively, a print beyond previous reading, 0.2%, could become supportive to the Fed Chair's recent comment that the economic conditions are likely to improve soon, supporting the Fed to hike interest rate during later part of the year.

Moreover, the Durable Goods Orders, which rallied in its previous release, again becomes likely print a negative growth, to -0.4% from upwardly revised 4.7% gain, while the Consumer Confidence Index may remain almost unchanged, to 95.3 from 95.2. Details relating to New Home Sales and Pending Home Sales show unclear scenario of US Housing Market as New Home Sales signals an improvement to 501K against the 481K while the Pending Home Sales is expected to print weaker growth number, to 0.8% from 1.1% prior.

Other than these top-notch readings, monthly reading of Chicago PMI, scheduled for Friday, and the weekly Jobless Claims, are additional numbers to help determine USD moves. The Manufacturing index, Chicago PMI, signals a bit of improvement, to 53.1 from 52.3 while the Jobless Claims are expected to print 272K reading against 274K prior.

With majority of headline numbers favoring continuation of USD correction, irrespective of recent rally, disappointing readings could provide considerable damages to the expectations supporting near-term rate hike by the Fed and to the US Dollar in-turn. However, growth numbers will be highlighted and an improvement in actual figure can support the greenback to extend its recent up-move.

Growth Numbers, Central Bank Announcements And The Rest

Its not the US GDP that could only gain spot lights, growth number from UK, Switzerland and the Canadian GDP are expected to infuse forex volatility too. Moreover, monetary policy meeting by the Bank of Canada and the release of recent BoJ meeting, coupled with Japanese details relating to Spending, Inflation, Unemployment Rate and Industrial Production, are additional data points that market players would like to know about.

Second estimation of Q1 2015 UK GDP, scheduled for Thursday, is likely to print GBP positive reading, to 0.4% against the initial estimation of 0.3%; however, the numbers still remains lower than its Q4 2014 print of 0.5%. Should the actual reading surpasses 0.5%, it becomes considerably positive for the GBP while a break below 0.3% is likely to tame recent UK optimism and can pullback the GBP strength.

Quarterly reading of Swiss GDP, scheduled for Friday, is likely to drag down the CHF, as the number is expected to wipe its previous two quarters' 0.6% gains by printing 0.0% mark. Given the actual reading meets forecast, it becomes likely that the SNB thinks of taking another initiative, after its January rate cut, to infuse the economy.

Having cut its benchmark interest rate during January, the Bank of Canada (BoC) remained standstill during the following months; however, weakness in economic numbers, coupled with declining Crude prices, Canada's main export, continue forcing the market players to expect central bank action. Even if the BoC isn't expected to act on its current monetary policy on its Wednesday's meeting, the rate statement could provide details of the economic outlook and helps foresee near-term BoC moves. Should the central bank sound dovish and/or cut down the interest rate in a surprise, the CAD is likely to plunge heavily while static outcome of the meeting, with no changes in economic outlook, continue supporting the sideways trading of CAD. Other than the BoC meeting, monthly reading of Canadian GDP, scheduled for Friday, could also help determine near-term CAD moves. The GDP numbers is likely to print 0.2%, highest in three months, against previously registered 0.0%, and could help CAD gain if the actual reading matches the forecast.

Minutes of recent BoJ meeting, scheduled for release on Wednesday, and the details relating to spending, inflation, unemployment rate and industrial production, scheduled for Friday release, become important to foresee near-term JPY moves. Even if the BoJ sound more hawkish in its recent monetary policy, without altering its current monetary policy, details relating to growth outlook and the policy makers' view on recent economic improvement could help examine recent JPY weakness. Moreover, the multiple releases are JPY supportive where improvements in spending and industrial production could counter the weaker inflation expectations and negate the near-term decline of the JPY.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Crucial Events On Cards To Continue Fueling Forex Market Volatility

Last week, nine month high capital goods orders and improved housing market details, coupled with better than forecast consumer confidence, helped securing the US Dollar upward trajectory against negative reading of Q1 2015 US GDP. The US Dollar Index (I.USDX) closed five-day trading with consecutive second weekly gains while the Euro region currency remained under pressure as Greece again failed to agree with its international creditors during self-imposed deadline talks. Moreover, the JPY registered heavy losses as weaker inflation and spending numbers, in addition to strong expectations of near-term rate hike by the Fed, continued suppressing the Japanese currency while the GBP was also weaker against majority of its counterparts as second estimate of Q1 2015 GDP plunged to the lowest since May 2013 by matching initial forecast of 0.3% growth.

During the first full week of June, many important details/events are to become catalyst to foresee near-term Forex moves. Amongst them, US labor market details and the series of UK PMIs, coupled with monetary policy meetings by the ECB, BoE and the RBA, are likely to generate headlines while Flash reading of EU CPI and Australian GDP are some other details that could continue making forex players busy during the week.

NFP To Rule This Week's US Economic Calendar

Ever since the Core CPI, coupled with Fed Chair's hawkish tone, fueled expectations that the Fed continues to be strong contestant for an interest rate hike this year, USD traders printed buying positions in favor of the greenback. Moreover, last week's better than forecast capital goods orders and housing market numbers, in addition to improved consumer confidence, helped them ignore the negative GDP reading and support the US Dollar Index to print another weekly gain.

This week, being the first of the month, has many important events scheduled that could help determine near-term USD moves. However, labor market details, up for Friday release, are ahead of all these numbers in weighing chances of near-term Fed rate hike.

In its recent release, the NFP came back to +200K number, the 223K, while the Unemployment Rate printed a fresh seven year low with 5.4% mark, supporting fair chances of an interest rate hike in 2015. Market players do expect the NFP to print 226K while the unemployment rate is expected to remain at 5.4%. Anything above +200K NFP print and a below 5.6% unemployment rate is favorable for the USD; however, a slight miss to the forecast could pull-back some of the recent greenback gains.

ADP Non-Farm Employment Change, scheduled for Wednesday release, becomes an indicator to foresee Friday's NFP number. Should the actual reading meets its three month high, 200K, forecast, against the 169K prior, it is likely to pave the way for stronger USD. Factory Orders, to be published on Tuesday, is another important reading to determine USD strength. The orders are likely to print 0.0%, reversing its prior two months' gains, to again join the six monthly decline series and an actual reading matching the consensus could drag down the greenback gains.

Other than these headline numbers, Monday's ISM Manufacturing PMI, Wednesday's monthly Trade Balance and Thursday's weekly reading of Jobless Claims are some of the additional readings that could help analyze the USD moves. While ISM Manufacturing and Trade Balance bear expectations of favorable prints, to 51.9 and -44.2B against 51.5 and -51.4B respectively, the Jobless Claims could decline to 277K against it 282K prior. Being the minor readings amongst the army of crucial US releases this week, only drastic changes in actual numbers could affect the USD trading.

With June hike almost off the table, market players are likely to determine the chances for September as a trigger for Fed's interest rate hike and should the labor market numbers meet their favorable forecasts, the Federal Reserve would have lesser obstacles to meet the market expectations, supporting considerable USD up-move. However, weaker than forecast reading by the NFP, printing a 220K below number and/or higher unemployment rate, may force the policy makers to think before introducing first interest rate hike since 2006, forcing the US Dollar to liquidate its recent gains.

ECB And EU Flash CPI To Help Determine Euro Moves

Even if this week's monetary policy meeting by the ECB, scheduled for Wednesday, is likely to become a non-event, press conference by the ECB President, Mario Draghi, following the rate announcement, becomes important to see how big the recent QE could be. Some of the policy makers have already said that the pace of QE will be high in near future and the ECB President has always praised the effectiveness of these measures. Should Mr. Draghi discusses recent economic weakness and need to magnify the QE effort, Euro could witness considerable downside while optimistic tone of the central banker, as always, may help Euro to minimize some of the recent losses.

Flash version of CPI, scheduled for Tuesday release, is likely to print six month high, to 0.1% against 0.0%, while the Core version also bears optimistic forecast to print 0.7%, five month high, against 0.6% prior. Given the inflation reading meets consensus, it could become strong positive for the Euro while a negative reading may force the region currency to extend its decline.

Australian GDP, RBA, BoE and UK PMIs Are The Rest To Fuel Forex Market

In addition to US NFP and EU CPI, monetary policy meetings by the Reserve Bank of Australia, Bank of England, quarterly release of Australian GDP and the Construction and Services PMIs from UK, are some of the important events to help foresee near-term Forex market moves.

Even if the RBA cut its benchmark interest rate for the second time in 2015 during April meeting, leaving more room for no change in current monetary policy meeting on Tuesday, the Governor, Glenn Stevens, left the doors open for another interest rate cut, if situation demands. Recent readings from Australia have been weaker while Chinese Manufacturing PMIs have starting gaining a bit, as could be witnessed from Monday's prints. Hence, unclear Australian economics could restrict the central bank from altering on-going monetary policy, supporting a bit of AUD strength; however, a bearish tone of the rate statement could provide additional drag to the AUD. Moreover, the quarterly reading of Australian GDP, scheduled for Wednesday, becomes another important event to help forecast near-term AUD moves. The number is expected to print 0.6% against 0.5% reading for Q4 2014 and an actual figure meeting the consensus could reverse some of the recent AUD losses. Other than these numbers, monthly details of Australian Retail Sales and Trade Balance, scheduled for Thursday release, are additional details to better foresee AUD moves. The Retail Sales is expected to maintain the same growth rate of 0.3% while the Trade deficit is likely to widen to the -2.11B against previous reading of -1.32B. Being the export oriented economy higher deficit is likely to draw more of AUD downside.

Although, monetary policy meeting by the Bank of England, scheduled for Thursday, expected to become a non-event, Construction PMI on Tuesday and the Services PMI on Wednesday, are likely to help foresee near-term GBP moves. After Monday, lesser than expected Manufacturing PMI, the Services PMI, core to the UK GDP, is likely to lag behind its previous 59.5 by printing 59.2 number, signaling more of GBP decline. However, the Construction PMI is expected to surpass 54.2 previous reading by marking 55.1 print and could become a support to restrict the GBP decline.

Other than the mentioned headline details, Canadian Ivey PMI, scheduled for Thursday, and the monthly details of Canadian labor market numbers, scheduled for Friday, are some other data points to fuel forex market moves. Considering recent weakness in Canadian economics, a plunge into the Ivey PMI number, coupled with another negative figure of Employment Change, beating the forecast of 10.2K against -19.7K prior, and the higher unemployment rate, against no change consensus to 6.8%, could provide considerable weakness to the Loonie, as it is nicknamed.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Handful Economic Releases To Restrict Big Moves

Last week, busy economic calendar kept fueling Forex market liquidity, mainly dominated by the optimistic US labor market details, higher than expected EU CPI and mixed releases from UK PMIs. The USD witnessed considerable up-move on Friday when the NFP rallied to its highest levels since December and the Average Hourly Earnings gained the most since August 2013; however, slump in Factory Orders and weaker ISM Non-Manufacturing PMI, published during early week days, restricted the US Dollar Index (I.USDX) from registering positive weekly close. The Euro remained mostly on the downside even after witnessing eight month high CPI as Greece again failed to agree with its international creditors during cash-for-reform deal and bundled the IMF payment to be paid at the end of June. European leaders are more concerned about the Grexit now that the EU head, Jean-Claude Juncker, rebuked Greek PM on Sunday and said that the final agreement should be adopted before June 13-14. The JPY rallied to its 13 year lows against USD as contradicting monetary policies of BoJ and Fed kept weakening the Japanese currency while the GBP was a tad weaker against its US counterpart with a dent in Services PMI hurting the UK currency.

With fewer economic releases scheduled during the current week, Forex market is less likely to witness volatility seen during recent times; however, US Retail Sales, PPI and Prelim UoM Consumer Sentiment, coupled with Chinese Industrial Production, Australian labor market details and RBNZ, could provide considerable market moves. Moreover, UK Trade Balance and Manufacturing Production and the Chinese Inflation details are also likely to offer meaningful information to determine near-term market trends. European economic calendar is empty during the week with focus mainly on the Wednesday's an EU-Latin America summit when the Greece is said to present its own ideas faster to enable talks with international creditors.

US Retail Sales, PPI and Consumer Sentiment Become Decisive To Foresee USD Moves

After witnessing pessimistic readings for Q1 2015 US GDP and Factory Orders for the month of May, market players are likely to concentrate more on the monthly details of US Retail Sales, scheduled for Thursday release, and the May PPI, scheduled for release on Friday, in order to determine the strength of US economy during Q2 2015.

While the Retail Sales are expected to rally towards testing more than a year's high by printing 1.1% number against previously reported 0.0% figure, the PPI is also likely to mark 11 month high with 0.4% gain as compared to -0.4% reading for the month of April. Moreover, the Preliminary reading of UoM Consumer Sentiment, also scheduled for Friday release, can show increased consumer confidence level to 91.3 as against the upwardly revised figure of 90.7 for the prior month. It should also be noted that the Core Retail Sales, scheduled to publish on Thursday as well, is also expected to re-test April 2014 levels and could help extend USD gains.

Other than these top-notch readings, weekly jobless claims, scheduled for Thursday, is expected to remain near the previous reading of 276K by printing 277K number and couldn't pose serious threat to current USD up-move unless there is drastic increase in the reading.

Considering the recent uptick in official reading of US Consumer Confidence, it is more likely that the Retail Sales matches the forecast and support the weekend rally of the greenback. Also, a commensurate improvement by the UoM Consumer Sentiment, which is more likely, could provide added reason for the US Dollar to extend its upward trajectory. However, market players are less likely to base their positional trades on these readings as Fed meeting, scheduled for June 17, becomes important to forecast interest rate moves by the central banker and is a better help to determine medium-to-longer-term USD moves.

Releases from China and Australia To Help Clarify AUD moves

Having witnessed weaker export numbers from China, during early Monday release, market players are likely to wait for the Chinese Inflation numbers, scheduled for Tuesday, and the Industrial Production, scheduled for release on Thursday, in order to foresee the moves of commodity currencies, mainly AUD, CAD and NZD. Moreover, monthly release of Australian labor market numbers, scheduled for Thursday, coupled with the NAB Business Confidence and the Westpac Consumer Sentiment, scheduled for release on Tuesday and Wednesday respectively, are also important numbers to clarify near-term AUD moves.

Source: Australian Bureau of Statistics​

Australian Labor market details, mainly Employment Change and the Unemployment Rate, are expected to support the RBA decision for not altering the monetary policy. While Unemployment Rate is expected to remain unchanged at 6.2%, the Employment Change is likely reversing its previous decline of -2.9K by printing 15.2K figure. Moreover, the recent strength in Business and Consumer Confidence indices can continue supporting the AUD up-move as the Business Confidence index may print the same 3 or the higher number while the Consumer Sentiment has rallied considerably in its previous reading, to 6.4% from -3.2%, and could extend the same during this print.

Moreover, Chinese CPI rallied to five month high in its previous reading, supporting optimism for Australian economy as being the largest consumer of Australia; though, expectations for the month of May signal bit of weakness into the inflation reading to test 1.3% mark and could weaken the AUD if the actual number meet or falls below consensus. However, the Industrial Production reading is likely to test three month high by printing 6.0% expansion, beating previously reported 5.9%, and can provide a reason for the Australian currency to witness gains.

UK Trade Balance, Manufacturing Production, RBNZ and the speech by BoC Governor

Recent plunge in UK Services PMI trimmed GBP strength and a monthly release of Trade Balance, scheduled for Tuesday, coupled with Wednesday's Industrial Production, could provide better help to foresee near-term moves of the UK currency.

UK Trade Balance is likely revealing lesser deficit to 10.0B against the previously recorded 10.1B of deficit while the Manufacturing Production is expected to grow with lesser pace, to 0.1% against 0.4% prior. Lesser than forecast Manufacturing PMI, released last week, may continue dragging the industrial production, extending the GBP decline in-turn. Moreover, the Trade Deficit is still running at higher levels and is less likely to help the GBP unless revealing considerable surplus.

Although, monetary policy meeting by the Reserve Bank of New Zealand (RBNZ), scheduled for Wednesday, is less likely to result an alteration in its current monetary policy; however, the tone of the rate statement and the speech by RBNZ Governor becomes decisive to determine near-term NZD moves. Market consensus reveals the tone to be slightly bearish, giving room for rate cuts during the end of the year; however, failed to signal such announcement and/or becoming optimistic can fuel the NZD strength.

BoC Governor is due for a speech about bi-annual Financial System Review Results, conducted by the central bank on Thursday. Should the results (and the speech) continue signaling threats of weaker crude prices, the CAD is likely liquidate its last week gains while an optimistic tone of the BoC Governor, considering recent improvement in economic details, could help extend the CAD up-move.

 

[Admiral Markets]

FOMC To Determine Near-Term USD Direction

Even if Greek tantrum failed to heal Euro-region during its last proclaimed deadline and US consumer details, namely the Retail Sales and Consumer Sentiment, printed better than expected numbers, early week losses by the greenback forced the US Dollar Index (I.USDX) to register consecutive second weekly decline. Japanese Yen signed its victory as uncertainty over the Grexit, coupled with this week's FOMC, continue supporting safe haven demand while the GBP registered considerable gains supported by improved economic details. Moreover, AUD flashed mixed gains due to counter-moves between weaker details from China and strong employment numbers at home signaling lack of clarity and the NZD kept running into losses as RBNZ unexpectedly cut its benchmark interest rate and favored loose monetary policy.

With the major central bankers, namely Federal Reserve, Bank of Japan and Swiss National Bank, scheduled to hold their monetary policy meeting during the current week, Forex market is likely to witness wild moves adjacent to announcements. Moreover, Testimony by the ECB President, Inflation numbers from UK and US, coupled with US housing market details and manufacturing signals, also, the UK labor market results, can continue offering liquid trading sessions.

FOMC To Drive US Dollar

Recent economics out of the US again favor early interest rate hike by the Federal Reserve; Though, June rate hike, during the FOMC meeting on Wednesday, is out of table and the rate announcement is less likely to reveal any surprises. However, FOMC Economic Projections, accompanying the rate release and the press conference by Fed Chair, following the rate decision, could provide considerable market moves.

Central Tendencies And Ranges Of Economic Projections: 2015–17 And Longer-Run

Source: www.federalreserve.gov​

In its latest economic projections, released during the March meeting, FOMC members expected lesser growth and Inflation numbers as compared to December forecast, signaling a later rate hike; however, recent announcement by the Fed Chair, Janet Yellen, in April meeting, indicated the rate hike by the end of 2015. Off-late the US economics are favoring the chances for the FOMC projections to inflate, that in-turn support the early interest rate hike. Moreover, forecasts for the Fed Fund rate by FOMC members could also provide considerable information to project Fed's first interest rate hike since 2006.

Other than the numbers, press conference by the Fed Chair would also provide meaningful information to determine near-term USD moves. Improvement in US numbers pushed the central banker to become hawkish off-late and an intact tone, supporting the early interest rate hike, may result noticeable USD gains.

In addition to the FOMC, Empire State Manufacturing Index & Industrial Production on Monday, Building Permits and Housing Starts on Tuesday and the CPI, together with the Philly Fed Manufacturing Index, scheduled for Thursday release, are some of the important details that could help determine near-term greenback gains.

While the Industrial Production is likely to test five month high of 0.2%, manufacturing details, as signaled by the Empire State and Philly Fed indices, favor the greenback advance by printing 5.8 and 8.1 numbers. However, the housing market stats, Housing Starts and Building Permits, indicates soft numbers to 1.10M and 1.11M as compared to 1.14M each respectively. Moreover, CPI release for the month of May is expected to test the highest level since July 2013, with 0.5% growth, and can provide an important support to the USD if matches the forecast.

With majority of the economic details supporting the greenback advance, a hawkish FOMC could provide considerable USD up-move; however, even with the neutral tone of the Fed policy makers, optimistic numbers could limit the near-term USD declines.

Draghi's Testimony and Greek Talks To Determine Euro Fate

ECB President, Mario Draghi, is scheduled to testify before the European Parliament's Economic and Monetary Affairs Committee, on Monday. Should the ECB Head kept singing the optimistic tone, the Euro can witness a mild pullback from its recent decline, due to Grexit fears. However, a neutral or dovish tone of the central banker can become an added reason for the Euro to extend its decline.

Failure to agree with its international creditors for one time, at its self proclaimed deadline, during last week, made Greece the enemy of Euro. However, the international creditors are ready to discuss the aid-for-reform package on Thursday. After the troubled region bundled the IMF payment at the end of the June, it looks forward towards Germany and France to get the support during discussions. Should the Greece again fails to get the basic reform list approved from its international creditors, it is likely to witness chances of bankruptcy, and the Grexit from EU as well, supporting the Euro plunge.

Moreover, ZEW Economic Sentiment indices for EU and the Germany, scheduled for release on Tuesday, are also expected to weaken the Euro as the EU index is likely to test four month lows, by printing 60.3, while the German reading may mark six months' low of 37.5.

UK CPI, Labor Market Details and the Retail Sales

Recent rout of UK economics have been quite mixed and the releases of headline numbers, from labor market and the inflation details, coupled with the Retail Sales, contributing major part of the GDP, could become important to determine near-term GBP up-move.

Monthly Inflation gauge for May, scheduled for Tuesday, is expected to test the five month high of 0.1% gain against the previous -0.1% and an actual reading matching with the forecast could support chances of the interest rate hike by the BoE in early 2016, pushing the GBP upwards. The UK labor market numbers, namely the Average Earnings, Claimant Count and the Unemployment Rate, scheduled for Wednesday release, are also supporting the UK currency up-move as Earnings are likely to rally by the highest since October 2011, 2.5%, while the Claimant Count Change is expected to plunge to -12.5K against its previous reading of -6.5K. Moreover, the Unemployment Rate is expected to remain unchanged at 5.5%. Retail Sales, scheduled for Thursday release, may become the only drag to limit GBP gains as it is expected to register no growth into the Britain's retail sales as compared to the previous 1.2% reading.

Release of recent BoE meeting minutes, scheduled on Wednesday, continue supporting the unchanged monetary policy and asset purchase program. Should any of the MPC members support an alteration into the current monetary policy, chances are likely that the GBP could witness a bit more of the up-move.

Monetary Policy Meetings of BoJ and SNB

Although, both the central banks, namely Bank of Japan (BoJ) and Swiss National Bank (SNB), aren't expected to alter their current monetary policy during Friday and Thursday respectively, it will be beneficial to observe press conference by the central bank heads, following the rate announcements, to determine near-term moves of JPY and CHF respectively.

Considering recent comments from Japanese PM's advisor supporting strong JPY, words from BoJ Governor, Hruhiko Kuroda, is likely to become important for the Japanese Yen. Should the central banker support an on-going loose monetary policy, with the lesser urge to stronger JPY, the national currency could extend its declines while an urge favoring the strong currency may help reverse some of the JPY losses. The SNB Chairman is less likely to support CHF strength and an announcement favoring the weaker Swiss currency could become a reason for the CHF plunge.

RBA Monetary Policy Meeting Minutes and New-Zealand GDP

Reserve Bank of Australia (RBA) recently avoided hiking interest rate hike in its June meeting, supporting the AUD advance. Should the meeting minutes reveal an optimistic outlook of the export oriented nation, the Australian Dollar is more likely to maintain its upward trajectory while a dovish tone, supporting the readiness to alter the benchmark interest rate, can drag the Aussie downwards.

Considering the recent decline in commodity prices, coupled with the unexpected rate cut by the RBNZ, quarterly release of New Zealand GDP, scheduled for Wednesday, is likely to provide an additional drag to the NZD as the growth number is likely to mark second consecutive quarter of less number by printing 0.6% mark.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Fewer But Important Economics Might Trigger US Dollar Recovery

With the Federal Reserve failed to provide clear signs of September rate hike, the much anticipated move, disappointment amongst market players drove down the greenback for one more weekly loss against majority of its counterparts. Moreover, weaker than anticipated print of inflation and industrial production numbers, coupled with lower interest rate projections for the coming years, also contributed towards registering consecutive third weekly decline by the US Dollar Index (I.USDX). At the European front, the Greece talks again failed during its last ditched efforts, forcing the EU to call an emergency meeting on Monday; though, the regional currency failed to reflect such pessimism as speculations strengthened that the region wouldn't allow for Grexit. The GBP was a clear winner as improvements in Inflation and labor market details supported speculations that the BoE may surpass the Fed in hiking interest rates while the JPY remained a bit mixed with the BoJ continue supporting loose monetary policy by mentioning strong economic outlook.

After witnessing headline numbers/events during last week, this week's economic calendar offers lesser events to fuel the Forex market. However, Flash Manufacturing and Services PMIs from EU, Germany and China, US Durable Goods Orders and final version of Q1 2015 GDP and German CPI are some of the important details that could provide considerable Forex moves during the current week. It should be noted that the UK economic calendar is empty during the current week. Let's discuss them in detail.

US GDP, Durable Goods Orders and Housing market Numbers To Determine USD Moves

Even if the Federal Reserve failed to comment on September rate hike, Fed Chair remained static on its first fed rate hike during 2015 should the economic indicators continue improve. Hence, a positive GDP reading on Wednesday, coupled with the strong Durable Goods numbers on Tuesday, could again strengthen the expectations for the Fed's near-term interest rate hike, in-turn rejuvenating the US Dollar rally. Moreover, the housing market numbers have been printing better numbers off-late and could become an added support for the USD during its releases on early week days.

With the US growth numbers all set to register its first quarterly decline in four to -0.2% number, the Federal Reserve might become cautious before signaling their first interest rate hike since 2006. However, such interruptions into the outcome was well orchestrated with the weather effects and should the actual GDP reading either matches the -0.2% or remains below its intermediate forecast of -0.7%, the USD can witness lesser negative effects. Also, a surprise reading into the positive region could fuel the greenback towards reversing some of its early month losses.

Moreover, the monthly reading of Durable Goods Orders m/m, scheduled for Tuesday, also supports the expectations of a strong USD as the figure is likely to register -0.6% mark against previously reported -1.0% while the Core reading is expected to reverse previous decline of -0.2% with the 0.6% growth in orders. Housing market details, namely Monday's Existing Home Sales and Tuesday's New Home Sales, are also in the cadre of expected US positives as the Existing Home Sales is likely to rise to 5.27M against its prior reading of 5.04M while the New Home Sales is expected to rally to 524K comparing its previous number of 517K.

In addition to the headline numbers, the monthly Personal Income-Spending details, scheduled for Thursday release, together with the weekly Jobless Claims, are showing mixed signs as details relating to income and spending are a bit more US positive while the Jobless Claims may pullback some of the greenback gains if meets the forecast signaling higher numbers.

Even if the cautious view of the Federal Reserve, coupled with downgraded forecasts, pulled back some of the greenback gains, a positive GDP reading could wipe the market pessimism and may help the US Dollar regain its strength. However, Greece talks could become an important indicator to determine the countermoves of the USD, as a successful deal will continue hurting the greenback.

Important Manufacturing and Services PMIs

Chinese HSBC Flash Manufacturing PMI, scheduled for Tuesday, opens the round of Flash readings of Manufacturing and Services PMIs from Europe, Germany and the US during the rest of the week. Even if the number is expected to register its consecutive fourth reading below 50 level, it is a bit higher, 49.4, than its upwardly revised previous reading of 49.2, and an actual number meeting the forecast can provide a relief to commodity currencies, namely AUD, NZD and CAD. Moreover, an actual reading above 50 level can become considerably better for these currencies, mainly the AUD.

German & EU Flash Manufacturing & Services PMIs, scheduled for Tuesday as well, are a bit mixed as the German Manufacturing PMIs is likely to continue its up-move, to 51.5 from 51.0, while the EU reading can weaken a bit to 52.0 from downwardly revised figure of 52.2.

US Flash Manufacturing PMI, scheduled for Tuesday, becomes another Manufacturing PMI to take care off. The figure is expected to test 54.2 mark as compared to its 54.0 upward revision of prior release and can become an added advantage, coupled with other scheduled events, for the USD to move up.

Germany and Greece Talks To Become EUR Signals

Other than the Manufacturing and Services PMIs, the German details, namely, Ifo Business Climate, on Wednesday, and the GfK German Consumer Climate, on Thursday, are important details to determine near-term EUR moves. With both the details unlikely to register considerable changes, the EUR moves are less expected to be affected by the outcomes except the actual figure marks excessive changes.

Having witnessed the another failure to reach the deal during talks between the Greece and its International creditors, the EU forced to have an emergency meeting on Monday that could determine the fate of Greece in Euro region. During its weekend telecom discussions between the German, French, Greek and the EU leaders, all of them seemed quite optimistic that the deal would be reached during the current week, saving the Greece from Euro exit. Moreover, the troubled nation also managed to present an acceptable proposal during its early Monday proceedings of the meeting, supporting the chances of getting the emergency funds. With the Greece now talking the tune of its international creditors, it is much likely that the Grexit can be avoided, providing considerable up-move to the EUR. However, history of the Greece discussion has always signal failed deal and given the such instance happen during its current final meeting, the Greece default, Grexit in-turn, can't be avoided, providing noticeable EUR weakness.

New Zealand Trade Balance and Japanese Details

After witnessing majority of details during early week days, the New-Zealand Trade Balance, scheduled for Thursday, and the Japanese Details relating to CPI and Unemployment Rate, scheduled to be released on Friday, are some other details that could help determine the respective moves of NZD and JPY.

Having witnessed a recent decline in New-Zealand GDP, a negative Trade Balance, expected to test -50M against previously reported 123M, can provide additional drag to the NZD while the Japanese CPI numbers are likely to print softer than prior announcements and could continue supporting the BoJ's lose monetary policy, in-turn supporting the JPY weakness. Moreover, the Japanese Unemployment Rate is expected to remained stagnant at 3.3% while the expected hike in Household Spending, to 3.5% from -1.3%, may help the JPY to strengthen against majority of its counterparts.



“Original analysis is provided by Admiral Markets”