Central Bankers and GDP To Fuel This Week’s Forex Moves
Following consecutive three week's decline, the US Dollar Index (I.USDX) finally managed to rally towards the highest levels in more than 2 months during its last week's advance as surprise rate cut by the Chinese Central bank, coupled with the ECB's favor to monetary policy easing, fueled investor sentiment for the greenback. The Euro plunged against majority of its counterparts as the ECB President favored need for more monetary easing; though, the actual announcement may come during its December meeting after thorough economic review while the JPY remained lackluster as speculations concerning additional monetary easing by the Bank of Japan (BoJ), during this week, kept limiting the Japanese currency's upside. Moreover, the GBP remained firm with upbeat Retail Sales figures and the antipodeans, namely, AUD, NZD and CAD, witnessed profit booking due to Chinese pessimism.
Current week has many important economic releases/events scheduled that could provide considerable Forex moves. Notable amongst them are monetary policy meetings by the FOMC, BoJ and the RBNZ, GDP releases from UK, US and Canada and CPI releases from EU, Australia and Germany. Moreover, US CB Consumer Confidence, Durable Goods Orders and Chicago PMI are some other details that could continue making Forex traders busy throughout the week.
Rather Than FOMC, The US GDP May Gain Major Market Attention
With the renewed strength in greenback, mainly due to pessimism at EU and China, it becomes more likely that US details will gain major market attention. However, unlike every-time, the FOMC is less prone to fuel the USD moves, unless a surprise signal for the rate hike, which isn't expected. Rather, the Advance reading of US Q3 2015 GDP, is likely gaining the hotspot as a strong reading could favor the December rate hike which is last hope for the USD traders to witness a first Fed rate hike since 2006 during the current year.
As can be seen from the aforementioned chart, the US GDP rallied during its last reading to 3.9% growth rate, indicating a strong economy to withstand the Fed rate hike. However, Advance estimation for Q3 2015 GDP, scheduled for release on Thursday, is expected to reveal economic weakness as forecasts favor 1.6% growth rate; Though, such slowdown in growth was previously expected, mainly due to Chinese weakness, and is less likely to affect the USD in a bitter way unless registering a below 0.6% mark that could raise the bar for the Federal Reserve to increase benchmark interest rates during 2015. Alternatively, an upbeat actual reading could provide considerable strength to the greenback on the back of expectations concerning December rate hike.
The monetary policy meeting by the FOMC, scheduled for Wednesday, is more likely to become a non-event, as it isn't followed by the Fed Chair's press conference and market has already funneled down the speculations favoring the Fed's interest rate lift-off during the current meeting. However, an indication favoring the rate hike during 2015, in the FOMC statement, can continue building the recent up-move by the US Dollar.
Other than the top-tier events, like GDP and FOMC, Monday's US New Home Sales, monthly readings of Durable Goods Orders and CB Consumer Confidence, scheduled for Tuesday, Thursday's Pending Home Sales and the Chicago PMI, scheduled to be released on Friday, are some other numbers that could help determine near-term USD moves. While New Home Sales signal a bit of weakness into the US housing market with 546K consensus against 552K prior, the Pending Home Sales are expected to erase prior declines of -1.4% with a +1.1% gain. Further, Durable Goods Orders may again print a negative -1.1% mark compared to -2.3% downwardly revised prior; though, Core reading is expected to be at 0.0% versus -0.2% previous mark. Moreover, official reading of Consumer Confidence is likely remaining near the recent highs of 103.00 with 102.5 forecast and Chicago PMI may head towards 50.00 level with 49.5 mark against the 48.7 reading registered previously. With the mixed expected outcomes from the US economic readings, chances are higher, considering the recent US optimism, that positive numbers of Consumer Confidence and Durable Goods Orders may help the greenback extend its on-going up-move.
EU Inflation To Become Euro Traders' Yardstick While UK GDP Will Decide GBP Moves
Even if the ECB President recently favored monetary policy easing, his words were more diplomatic as he said the action can only be finalized after December review; hence, Thursday's Preliminary reading of German CPI and Flash reading of EU Inflation, scheduled for Friday, could provide meaningful information to determine EUR trend. While German CPI is expected to continue printing negative readings, with -0.1% mark against -0.2% prior, the EU CPI is likely reversing its prior -0.1% declines with 0.0% mark. Should the actual EU CPI matches forecast, chances of Euro witnessing a bit of pullback can't be denied; however, another negative inflation reading could strengthen the recent EUR bears favoring QE extension and a plunge of regional currency
Off-late comments from BoE policy makers have been dovish and affected the GBP in a negative way; however, Preliminary reading of Q3 2015 UK GDP, scheduled for Tuesday, becomes an important indicator to gauge Britain's strength. The forecasts favor a bit of slowdown in the growth number to 0.6% from 0.7%. Hence, an actual release either matching or printing a lower number could confirm that the policy makers are right in their public comments favoring the loose monetary policy, indicating further declines by the GBP.
Bank Of Japan May Direct JPY Trend
Since last few months, the JPY has been trading volatile against majority of its counterparts, mainly due to its safe haven status and lack of any policy hints by the Bank of Japan. However, the same is less likely to continue going forward as speculations concerning the need of additional monetary easing, backed by comments from some of the BoJ policy makers, have gained momentum off-late and this week's monetary policy meeting by the Japanese Central bank, on Friday, will be crucial to determine the strength of JPY. Considering downbeat Japanese economics, market expectations signal that the Bank of Japan will revise down its inflation and growth outlook, in its bi-annual BoJ outlook report, and may hint for the need of further monetary easing. Should the Japanese central bank matches consensus and cut down its economic forecasts, coupled with favoring the need of change in monetary policy, chances of JPY witnessing a sharp decline can't be avoided. However, no change in the economic expectations by the central bank and/or a hawkish tone to keep supporting existing monetary policy could further accelerate the JPY advance.
Economic Details Affecting Antipodeans, namely AUD, CAD and NZD
Commodity currencies have recently been positive due to a bounce in commodity prices; however, fresh move by the China, to cut down its interest rate for the fifth time this year, pumped renewed selling pressure that could be magnified depending upon the scheduled economic releases from Australia, New-Zealand and Canada. Amongst them, Tuesday's New-Zealand Trade Balance and monetary policy meeting by the Reserve Bank of New-Zealand (RBNZ), scheduled for Wednesday, becomes important to forecast NZD moves while AUD traders should watch for Australian CPI and PPI, to be released on Wednesday and Friday respectively. Moreover, Friday's Canadian GDP, together with the Crude momentum are likely cues that the CAD traders should pick.
Although, the RBNZ isn't expected to alter its current monetary policy, dovish comments in a rate statement, considering weaker dairy prices, could magnify the NZD downside while higher Trade Deficit, than the -822M expected and -1035M prior, can become a trigger for the NZD decline. Further, Australian Inflation numbers, namely CPI and PPI, are more likely to miss the expectations favoring no change in the prior 0.7% CPI and 0.3% PPI, signaling extended AUD downside. Moreover, the Canadian economy is expected to witness another weaker GDP reading, to 0.1% versus 0.3% prior, and can open room for the further southward journey by the Canadian Dollar (CAD).
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