Handful of Economic Releases To Continue Fueling Forex Volatility
Following two months of dismal readings, Friday's upbeat US job numbers strengthened speculations that the Federal Reserve will lift its benchmark interest-rate during December meeting, fueling the US Dollar Index (I.USDX) towards highest levels in more than six months, needless to mention about the weekly gain. The Euro, left with no major releases, gave-up some of its recent gains as market players kept focusing more on the USD strength while news that the European Commission downgraded euro-area growth and inflation outlook for 2016 provided additional reason to the Euro bears to sell the regional currency. Further, the GBP witnessed considerable downside as BoE, via its Quarterly Inflation Report (QIR), lowered down the inflation and growth forecasts and dovish comments from the central bank Governor caused additional weakness into the Pound. Moreover, the AUD remained stronger against majority of its counterparts, except the USD, as the Reserve bank of Australia (RBA) refrained from interest rate cut while the JPY was on southward journey due to lack of major economic releases and improvement in risk sentiment that cut down the Japanese Yen's demand.
Even if some of the crucial data-points have been released last week, financial stability report from the RBNZ, Australian and UK job details, coupled with EU Flash GDP and US Retail Sales and PPI, could continue fueling the Forex moves during the current week. Let's discuss them in detail.
US Retail Sales Can Help USD Extend Its Recent Up-Move
With the recent labor market details renewing speculations concerning Federal Reserve's interest-rate lift-off in December, providing considerable USD strength, upcoming data-points from the US are likely to be examined closely in order to foresee near-term moves of the greenback. However, the US economy has fewer economic details to publish during the week, except on Friday when monthly details of Retail Sales, PPI and the Preliminary reading of UoM Consumer Sentiment will help forecast the USD moves.
Looking at the previous details of consumer centric data, including Retail Sales and UoM Consumer Sentiment, the Retail Sales grew marginally, with only 0.1% gain, during the month of October and the Consumer Sentiment marked a revised down 90.00 number while the Core Retail Sales contracted with -0.3% mark. Moreover, the PPI plunged negative with -0.5% print. Forecasts relating to the current statistics favor a three month high Retail Sales and Consumer Sentiment to 0.3% growth rate and 91.3 print respectively while the PPI and Core Retail Sales are expected to reverse their prior declines with 0.2% and 0.4% respective gains.
Recent improvements in US data points, coupled with hawkish tone of some of the FOMC members, during their public appearances, may get validated boost should the US consumer centric details print positive numbers. However, disappointment from the scheduled economic data-points may trigger USD pullback; though, overall greenback strength can't be negated and December rate hike speculation may remain intact unless these numbers register drastic declines.
UK Labor Market Details To Get Major Attention
Pessimistic outcome of the BoE's QIR have got magnified impacts as the UK central bank was perceived to be another interest rate hike contestant, after the Fed, and a passive outcome via BoE disappointed the GBP bulls. However, monthly readings of UK job market, scheduled for Wednesday, could renew the Pound strength if they print upbeat numbers.
UK Labor Market Details
Looking at the aforementioned chart, the UK Unemployment Rate have been going south since 2012 and is currently near the record lows of 5.4%; however, the Claimant Counts are increasing off-late, causing a worry for the UK policy makers to determine the strength job market. Moreover, the Average Earning is also on the northwards move, signaling an increased income and an expected rise in the inflation that in-turn could help the UK MPC members to shift from their recent dovish words towards the optimistic scenario and a higher interest rate in future.
In its latest print the Unemployment rate dipped to 5.4% lows while the Claimant Count Change rose to three months high to 4.6K and the Average earnings rallied by 3.0%. The current consensus favors an increase in earnings, to 3.2%, the highest in four months, and a cut in Claimant Count to 1.6K while the Unemployment rate is expected to remain static at 5.4%.
Should the monthly details of UK job numbers print downbeat readings, chances of monetary policy easing, rather than the interest rate hike, gets strengthened, providing noticeable damages to the UK currency. Although, strong labor market numbers, which become more likely, can erase recent declines of the GBP.
EU GDP Can Clear Near-Term EUR Trend
Even if the ECB President, during his press conference following recent monetary policy meeting, favored chances of additional monetary easing, Q3 2015 GDP growth numbers from EU and Germany, scheduled for release on Friday, become important to determine near-term EUR strength as strong economic growth may not need extra loose monetary policy and can help the regional currency recover its recent losses.
Preliminary numbers of Q3 2015 GDP signals that the German economic growth has been slowed down with 0.3% gain from 0.4% prior while the EU GDP growth remained static near the upwardly revised 0.4% mark. Should these growth numbers favor an optimistic scenario, chances of QE extension during December meeting weakens, favoring strong EUR. However, disappointing numbers could magnify the ECB President's dovish statement relating to the need of further monetary easing and can provide considerable downside to the Euro.
Chinese Industrial Production and Inflation Numbers, RBNZ and Australian Job Details Are The Rest To Observe
Although China has been flashing red economic signals off-late, spreading more pessimism amongst the global industrial players and commodity basket, monthly details of Industrial Production and Inflation numbers, namely CPI and PPI, scheduled for Tuesday and Wednesday, become important to determine the strength of world's largest industrial player. While the CPI is expected to mark 1.5% against 1.6% prior and the PPI may register contraction of -5.9%, same as previous reading, the Industrial Production can increase at a bit faster rate of 5.8% against 5.7% prior. Should the Industrial Production register higher growth rate and inflation readings mark improvements, commodity currencies, namely AUD, NZD and CAD can have a reason to celebrate; however, continued deterioration by the Chinese economics favor chances of further monetary easing by the Chinese central bank, providing another setback to AUD, NZD and CAD.
On Tuesday, the Reserve Bank of New-Zealand (RBNZ) is scheduled to release its bi-annual Financial Stability Report where in the central bank would provide insights of inflation, growth, and other economic conditions from their perspective. The announcement will be followed by the press conference of the RBNZ Governor.
Considering the recent declines in daily prices, coupled with downbeat job numbers and Chinese pessimism, the central bank is more likely to convey pessimistic messages, favoring further NZD declines; however, an upbeat economic view, coupled with optimistic tone of the central bank Governor, can reimburse some of the recent losses of the New-Zealand Dollar.
Australian Bureau of Statistics is scheduled to announce monthly details of job markets on Thursday. Key labor market indicators, namely Employment Change and Unemployment Rate, are showing signs of improvement from their previous releases. The Employment Change is expected to bounce from its -5.1K mark with +14.8K number while the Unemployment Rate is likely remaining stagnant at its 6.2% level. After consecutive resistance from the Reserve Bank of Australia (RBA) to cut their benchmark interest-rate, coupled with brighter economic expectations, set of upbeat job numbers can provide noticeable strength to the Australian Dollar (AUD); however, Chinese pessimism could restrict excessive gains of the Aussie, as it is nicknamed.
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