Overview of Weekly Events
Last week, the much awaited FOMC spread pessimism amongst USD traders as press conference by the Federal Reserve Chair signaled stable interest rates even after the Fed comes to an end of bond purchases. Further, the downgrading of inflation and economic projections became additional reason for the market to weaken the greenback. These announcements caused the US Dollar (I.USDX) to test the lowest level in nearly a month in addition to witnessing a negative closing on a weekly basis. The Euro gained even with no major economics to track while the early rate hike speculations, caused by BoE meeting minutes, fuelled the GBPUSD towards the highest level since October 2008.
Having witnessed the Chinese HSBC Flash Manufacturing PMI, in addition to various Manufacturing and Services PMIs from EU nations, during early Monday, this week’s economic calendar is left with lesser releases to track. US GDP, financial stability report by Bank of England, Ifo Business Climate, Consumer Climate and Preliminary CPI from Germany and releases relating to retail sector from Japan can become the key highlights of the week. Further, geo-political tensions in Iraq can continue to fuel the safe haven demand of the risk-free asset classes while an acute step by US can provide additional support to these asset classes.
US Economic Releases
With the FOMC already vanished expectations of early rate hike, market participants are more likely to be driven by the incoming economic releases in order to determine the near-term movement of the USD. The final version of Q1 2014 GDP, scheduled to release on Wednesday, and the CB Consumer Confidence, scheduled for Tuesday release, are the two important events that can fuel volatility into the pairs connected to USD. Moreover, Existing Home Sales and New Home Sales, scheduled for Monday and Tuesday respectively, Durable Goods Orders, scheduled for release on Wednesday, and Weekly Jobless Claims scheduled for Thursday release, are some of the additional events that can continue making traders busy during the current week.
US Final GDP q/q is likely to continue spreading the pessimism with the forecasts favoring a 1.7% decline into the figure against the preliminary reading of -1.0% while the CB Consumer Confidence is expected to test 83.6 level, the highest since January 2008 against the previous reading of 83. The Existing and New Home Sales figures are likely to continue depicting rosy picture of US Housing Market, the Durable Goods Orders bears the forecast of testing the lowest levels since February reading while the weekly reading of Jobless Claims is expected to remain nearby its previous reading.
To sum up, the US economic calendar is more likely to bend towards optimist readings. However, should there be a surprise in actual readings that reflects weakness into the world’s largest economy, the US Dollar may extend its last week’s negative trading.
Europe
As the ECB President has clearly denied any expectations of a rate hike in near future with their recent monetary policy actions, the Euro region currency is likely to continue bearing the fruits of excessive money supply. However, should the incoming data plots optimism for the region, the Euro can rally. During the early Monday, the Manufacturing and Services PMIs from France, Germany and Euro-zone signaled pessimism as all of them lagged behind their market consensus. Moreover, the French reading became disappointing one.
Moving forward, the European economic calendar is only left with German readings, namely, Ifo Business Climate on Tuesday, GfK Consumer Climate on Wednesday and Preliminary CPI reading on Friday. The Business and the Consumer Climate Indices are likely to remain at the previous levels while the Preliminary CPI reading is expected to test the highest level in 3 months. Should the actual reading of German CPI matches the market expectations, Euro can rally on the back of the expectations that the largest economy of Europe can be reflecting the inflation hike in entire Euro-zone. Alternatively, a weaker number drawing below 0.0% levels can continue to spread the fears of deflation into the EU nations which in turn is likely to continue hurting the Euro strength.
UK
Britain doesn’t have more number of economic indicators to shake the forex market during the current week except the twice in a year release of financial stability report together with a speech by BoE Governor, Mark Carney, scheduled for Thursday release. Due to the recent hints by the BoE, the market players are more likely to scrutinize any hints for the near term rate hike, Should there be a strong signal for the nearest rate hike, the GBP can rally against its major counterparts. However, absence to deliver a hint relating to near term rate hike, is unlikely to cause worry for GBP pairs. Moreover, should the BoE Governor, signals the need to wait for witnessing higher interest rates, the GBP can witness a pull back into its recent rally.
Asia
After witnessing the first advance during previous six months into the Chinese HSBC Flash Manufacturing PMI, the Asian economic calendar seems empty with only fewer retail sector releases from Japan. The Household Spending, Tokyo Core CPI and the Retail Sales, scheduled for Friday release, are the only events from Japan that can become important for the pairs connected to JPY. While the Household spending and Retail Sales are likely to depict the lesser harm of sales tax hike, the CPI figure is expected to remain at the current level. Should the Spending and Retails Sales weaken further from the previous levels, the BoJ is likely to infuse Japanese monetary markets with additional measures; on the other hand figures matching the forecast or even rising above the forecast levels can fuel the JPY strength.
“Original analysis is provided by
Admiral Markets”