The forex markets are staying in range as the week kicks off. Traders seem unfazed by the China GDP miss, and are instead focused on Bernanke's testimony later this week. The messages since last week's FOMC minutes were rather confusing, and it's highly uncertain what pace the Fed will utilize to taper the stimulus program. There is deep division inside the Fed regarding this as clearly seen from other Fed officials recent comments. On Friday, St. Louis Fed Bullard, a known dove, warned that "pulling back on accommodation as inflation is sinking is not the right combination." On the other hand, Philadelphia Fed Plosser urged to "begin to taper very soon" and he even wanted the Fed to "end it by the end of this year". Bernanke's semi-annual testimony to Congress on Wednesday and Thursday will be closely monitored. There are, however, speculations that Bernanke would sound hawkish in his prepared speech and dovish in his Q&A and keep traders puzzled. Stocks will probably extend the recent run for historical highs, while the dollar will probably stay in range against other major currencies.
Apart from Bernanke's testimony, there are a number of other important events slated for this week. The BoC will have the first rate decision with Stephen Poloz as governor. He's expected to be very careful with his first statement, to avoid the absolute hawk/dove label. The RBA and BoE will release meeting minutes.
Other important events to watch include:
- Monday: U.S. retail sales, empire statement manufacturing
- Tuesday: New Zealand CPI; RBA minutes; UK CPI, PPI; German ZEW, EZ CPI; US CPI, TIC, industrial production
- Wednesday: BoE minutes, U.K. jobs; U.S. housing starts, permits; BoC rate decision; Bernanke testimony
- Thursday: U.K. retail sales; Bernanke testimony, jobless claims, Philly Fed survey
- Friday: Canada CPI
Released today, China's GDP grew 7.5% in Q2, missing expectations of 7.7% compared to Q1's 7.7%. It's the second consecutive quart of deceleration in GDP growth and the lowest rate since last Q3. Other data saw industrial production rose 8.9% yoy in June, missing expectations of 9.1%. However, retail sales rose 13.3% yoy in June, beating consensus of 12.9%.
Latest CFTC data showed that on July 9, positions of all major currencies deteriorated against the greenback compared to the prior week. It should be noted that this was prior to the FOMC minutes triggered sharp dollar selloff. Euro net shorts rose again to -40.9k from -16.1k in the prior week. Yen net shorts rose to -80.3k, from -70.7k. Sterling net shorts rose slightly to -34.3k, from -31.3k. Aussie net shorts dropped slightly to -63.3k, from the 2013 high of -70.5k. Canadian net shorts rose slightly to -23.8k from -16.3k.