Key Events This Week: June 15th-19th
USD: FOMC Rate Decision - Wednesday, CPI – Thursday
GBP: CPI – Tuesday
EUR: German ZEW – Wednesday
NZD: GDP – Wednesday
CHF: SNB Sight Deposit, 3-Month Libor – Thursday
CAD: CPI – Friday
Overview
- USD Following the explosive NFP beat on June 5th, USD started last week rather disappointingly, as positive momentum was unwound. The unemployment rate had missed and as such, the data didn’t warrant the full engagement needed to push the dollar higher from these levels. A retail sales beat on Thursday spurred some bullish action, but strength was faded late in the day and again on Friday. The feeling here is that momentum is no longer on the side of USD bullishness. Recent data beats have not been enough to inspire a return to the March highs and for now, USD is stuck in the middle of May’s trading range. FOMC rate decision and CPI data provide key risk this week.
- EUR Continued to rise last week as European yields dragged the single currency higher, supported also by the USD weakness we’ve seen. ECB’s President Mario Draghi’s comment on bond-market volatility, that “we should get used to periods of higher volatility” suggests that we could see European yields rise further. The situation in Greece poses a risk to EUR upside, as the debt stricken country appears even closer to default. The key now will be which goes higher, European yields or US data? German ZEW on Tuesday will be important, but US data will be the main factor in this week’s trading outlook.
- GBP Enjoyed a smooth ride to the upside last week, having once again found support around the post March FOMC high area. Currently stalled at a test of the key 1.55-5550 resistance, it seems that GBP’s move last week was really just on the back of the USD unwind. Key data for the UK this week will set the direction from here. Traders will be keen to see whether last month’s negative inflation print will be reversed or see a further decline.
- JPY Kuroda cleaned up the picture last week for those watching the key 125 level break in USD/JPY. Comments surrounding the weakness of the yen and the unlikelihood of it depreciating any further spurred a rather acute bout of JPY appreciation. Expectations around future monetary easing have subsided following these comments, and JPY strength is likely to be a key theme over the next few weeks.
- AUD Remained firmly rangebound last week despite two key events. Firstly, the RBNZ cut New Zealand’s interest rate, spurring a gap higher in AUD/NZD, which saw AUD, and secondly, we saw an impressive upside surprise in the Employment change and a further decline in the Unemployment rate. However, the composition of the employment change was mainly comprised of part-time employment, and doesn’t signal confidence for the real strength of the Australian economy. Chinese growth continues to slow and CPI/PPI both missed last week. With iron ore exports continuing to fall and the RBA stating that further depreciation of the currency is “likely and necessary,” the medium term picture appears bearish for the Australian currency.
- CAD Oil rotated higher within its recent range last week, taking the Canadian currency higher as well. Further support came from the USD’s weakness, which set the tone for the week, seeing only a mild recovery in USD/CAD following the US retail sales beat on Thursday. The key now for CAD will be where oil heads from this now 7 week old range. CPI data on Friday will be closely watched given the BoC’s recent decision to hold rates steady.