The Forex Week Ahead: March 7th – 11th
Mon: JPY – 4Q GDP, Trade Balance and Current Account
Tue: CNY – Trade Balance, CHF – Unemployment Rate, CPI – EUR – Eurozone 4Q GDP
Wed: GBP – Industrial and Manufacturing Production, NIESR GDP Estimate, CAD – BOC Rate Decision, NZD – RBNZ Rate Decision, USD – Crude Oil Inventories.
Thu: CNY – CPI and New Loans, EUR – ECB Rate Decision
Fri: GBP – Trade Balance, CAD – Unemployment Rate
Overview
- USD Sentiment remains mixed with regard to US rate-hike expectations. Following on from stronger core CPI and 4Q GDP data, the latest employment data showed that despite a firm Nonfarm Payrolls print, wage-growth is softening, with Average Hourly Earnings falling MoM for the first time since 2014.
- EUR Stronger equity markets continue to weigh on EUR as we head into the key March ECB meeting, where markets are expecting the central bank to announce further measures. Reports on Friday stated that there was as yet no ECB consensus beyond a further deposit rate cut of 10bps. Following on from the ECB’s December meeting where the ECB disappointed markets by failing to surpass baseline expectations, traders are keen to see whether the ECB can properly deliver this time around.
- GBP Despite a slew of weak PMI data sets and continuing Brexit concerns, sterling was able to forge a recovery higher last week driven by improved risk-sentiment. The UK Markit Services PMI dropped to a three-year low of 52.7, showing that Britain’s recovery from the financial crisis is losing momentum, and why policymakers from BoE have said they stand ready to boost the economy if needed. Domestic data focus this week will be on Trade Balance and GDP estimate.
- JPY Amidst a firm recovery in risk sentiment last week, JPY weakened in the absence of safe-haven demand. BOJ’s Kuroda commented that for the time-being the central bank is not considering a further reduction in Japan’s now negative interest rates, and instead is allowing time to monitor the situations and subsequent effects. Japanese 4Q GDP will be the key domestic data focus on Monday. Kuroda also speaks in the early hours of Monday morning.
- AUD The Australian dollar was driven sharply higher last week as a combination of improved risk sentiment, USD weakness and positioning conspired to support the Antipodean currency. CFTC COT positioning data shows that AUD positioning has flipped net-long for the first time since 2015 as the Aussie surges higher in tandem with the breakout in gold.
- CAD Continued strength in oil markets has seen the Canadian dollar establishing a further recovery as investors dial back BOC easing expectations ahead of the central bank’s March meeting this week. Despite US Crude Oil Inventories continuing to show record builds, market is driven by optimism for an OPEC deal to halt production at January levels. Key data focus this week will be the BOC rate decision on Wednesday.