Fewer But Meaningful Releases To Fuel This Week’s Forex Moves
Another set of disappointing US job details, released last Friday, raised doubts concerning the strength of world's largest economy to withstand a rate hike before year-end. This, together with the weakest factory orders in eight months, triggered the first negative weekly closing, in previous three, by the US Dollar (I.USDX). The Euro ignored deflation threats popped by the Flash CPI estimate as weaker greenback shifted back some strength to the regional currency while the JPY, even after witnessing not so good economics, strengthened against majority of its counterparts as global uncertainty helped fueling its safe haven demand. Moreover, the GBP remained strong with better than forecast PMIs and declining current account deficit while Crude prices gained a bit as Russia prepares to talk with OPEC and Non-OPEC members to alter the global crude supply and fifth weekly fall in the U.S. oil rig count underpinned the energy prices.
Having witnessed EU CPI and US labor market numbers during last week, the current week has fewer economic releases scheduled for publish; however, monetary policy meetings by the RBA, BoE and BoJ, coupled with the minutes of the September FOMC meeting are likely to continue fueling the forex moves. Moreover, Trade Balance numbers from Australia, US and Canada, together with the UK Manufacturing Production and Canadian job numbers, are additional details that could make Forex traders busy throughout the current week. It should also be noted that the Chinese markets are close till Thursday while German Factory Orders becomes the only European number up for release during the week. Let's closely examine each of these events.
FOMC Meeting Minutes To Signal USD Trend
Consecutive second NFP below 200K mark, coupled with stagnated wage growth, has made the US policy makers feel pride for their hold-on interest rate lift during September meeting. The policy makers are now being cautious for the December rate hike, for which the chances are higher, and would closely examine each of the economic details prior to practicing such move. However, it becomes all the more important to know what exactly caused them to avoid much expected interest rate hike during September meeting; hence, the minutes of the same meeting would provide critical details to determine near-term USD moves.
During its September FOMC meeting, the Federal Reserve step back from the much awaited rate hike move and cut down the growth and inflation forecasts; however, 13 out of 17 policy makers still favor an interest rate lift during the current year, shifting the importance to the December meeting as October move becomes out of question due to weaker economic details. FOMC meeting minutes, scheduled for release on Thursday, could reveal some important details as to what was the main concern behind such avoidance of interest rate increase. Moreover, the minutes would also reveal what are the economic prospects Federal Reserve is expecting for such move to take place in future.
Should the minutes reveal an overall optimistic tone of the FOMC members, as some of them have confirmed in their recent public speeches, together with an indication to December rate hike, the US Dollar could reimburse some of its immediate losses. However, diplomatic tone of the members regarding December rate hike, coupled with the threat concerning the global economic slowdown delaying Fed rate hike, may continue favoring additional downside by the greenback.
In addition to the FOMC minutes, ISM Non-Manufacturing PMI, scheduled for Monday release, and Trade Balance, to be announced on Tuesday, are some other economic details that could help determine near-term USD moves. Given the PMI matches it's weaker than previous forecast, to 58.00 from 59.00, and the Trade deficit also rises to -42.2B versus -41.9B prior, chances of further declines by the USD can't be denied.
German Factory Orders May Help Extend EUR Gains
As no other releases from Europe scheduled for publish during the current week, chances of the German factory orders, scheduled for Tuesday, helping the regional currency extend its recent gains can't be denied. Should the monthly reading from Europe's largest economy matches its forecast of reversing prior -1.4% decline with 0.5% advance, the Euro can continue registering gains against majority of its counterparts; however, another negative reading of the German Factory Orders could strengthen chances of the QE extension as the recent negative reading by the Inflation number have already triggered some doubt about the deflation into the economy.
GBP Traders Should Watch BoE Details
Even if recent UK details have been positive, the BoE MPC members kept on shunning chances of interest rate hike by the UK central bank during the current year while some of them went farther and said that the next move from the BoE would be an interest rate cut rather than a hike. Hence, monetary policy meeting by the Bank of England (BoE), scheduled for Thursday, coupled with the releases concerning MPC votes for the Official Bank Rate and Asset Purchase Facility, become important to determine near-term GBP trades. Moreover, monthly reading of Manufacturing Production, scheduled for Wednesday, is another important reading to help foresee GBP moves.
Although, the BoE isn't expected to alter its current monetary policy, increase in the votes favoring rate change or asset purchase facility change could help extending the recent GBP strength. Moreover, an actual manufacturing production rise, matching with the five month high forecast, to +0.5%, also reversing previous declines of -0.8%, can provide additional reason for the UK currency to gain.
AUD Moves To Depend Upon RBA and Trade Balance
With Chinese markets closed during the first three days of the week, and having no releases scheduled during the rest of the week, Australian economic details would become helpful in forecasting the near-term AUD trend.
Tuesday becomes an important day for the Australian Dollar (AUD) as monthly details of Trade Balance, coupled with the monetary policy meeting by the Reserve Bank of Australia (RBA), are both scheduled to take place during the same day. While the Trade deficit is expected to shrank to -2.36B versus -2.46B prior, the RBA is expected to hold its current monetary policy intact for the fifth straight meeting.
Absence of Chinese details could help AUD register gains provided the Trade Balance matches forecast while five month intact monetary policy, coupled with the hawkish tone in the statement, may become an additional fuel for the Aussie, as it is nicknamed, to stretch its recent up-move.
BoJ and Canadian Numbers To Help Forecast Respective Trades of JPY & CAD
Weaker inflation and manufacturing details have helped building speculations that the Japanese economy is again slowing down and is in need for more stimulus. However, the policy makers aren't expected to change their monetary policy during the current Bank of Japan (BoJ) meeting, scheduled for Wednesday. Given the central bank's signal to continue adhering to accommodative monetary, coupled with indication of global economic slowdown, the JPY may witness a pullback. However, ongoing uncertainty about the global economic situation could restrict further downside by the Japanese currency that enjoys the safe-haven status.
Recent improvement in Crude prices, mainly due to the Russian trigger and declining US rig counts, helped the Canadian Dollar (CAD) register some gains; however, Trade balance and Ivey PMI, scheduled for Tuesday, Wednesday's Building Permits and the labor market details, up for publish on Friday, become crucial to forecast near-term CAD moves.
While the trade deficit is expected to shrink to -0.3B from -0.6B and the Ivey PMI is on its up-move, recent declines in Building Permits and higher Unemployment rate could continue restricting further advances by the CAD. Moreover, a weaker reading of Employment Change may provide additional downside to the Canadian currency.
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