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FX Week Ahead: From Fed And BOE Rate Decisions To US CPI

Published 03/14/2016, 01:33 AM
Updated 07/09/2023, 06:31 AM
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Sun: CNY – New Loans
Mon: EUR – Eurozone Industrial Production
Tue: JPY – BOJ Monetary Policy Statement & Policy Rate, NZD – Dairy Auctions, AUD – RBA Meeting Minutes, EUR – Eurozone Employment YoY 4Q, USD – Advance Retail Sales
Wed: GBP – ILO Unemployment, Average Weekly Earnings, UK Budget Speech, USD – CPI, Average Weekly Earnings, Industrial & Manufacturing Production, Crude Oil Inventories, FOMC Rate Decision, NZD – GDP
Thu: AUD – Unemployment Rate, SNB – Libor Target (3mth), GBPBOE Rate Decision
Fri: CAD – Retail Sales, CPI, USD – Michigan Confidence Survey

Overview

USD – In the absence of key US data, USD was driven mainly by EUR flows in the wake of the ECB meeting, falling sharply as the EUR rallied post-decision. Attention now turns firmly to this week’s FOMC meeting. CME group is pricing 0% chance of a rate-hike, though traders will be keen to scrutinize the accompanying statement and press-conference for clues as to the likely rate-path over the remainder of the year.

EUR – ECB President Darghi must have been fiercely disappointed to suffer the same fate as he did in December, as the euro rallied following the ECB meeting. However, the new measures announced suggest that the ECB is moving away from attempts to weaken the euro in an effort to fuel external demand and increased import prices, and instead is focusing on improving eurozone credit conditions, looking to fuel a domestic recovery through supporting the banks and credit-growth.

GBP Brexit concerns took a back-seat last week as sterling was driven higher by a significantly weakened USD and subsequently from firmer risk-sentiment in the wake of the ECB meeting as equities finally turned higher. Upside was capped on Friday as the latest Trade Balance data showed a widening of the deficit. Employment and earnings data will be key domestic data focus this week.

JPY – Better risk sentiment saw JPY in less demand last week as equities eventually broke higher in response to the ECB meeting. Further Bank of Japan’s easing should be a combination of lower negative rates and increased asset purchases, according to comments from Etsuro Honda, an adviser to Japanese Prime Minister Shinzo Abe. According to BOJ’s Kuroda, markets are not to expect and further easing at this months policy meeting.

AUD – The Australian dollar continued to forge higher ground last week supported by a broadly risk-on appetite. Chinese CPI mid-week was better than expected and kep positive sentiment intact. The RBNZ unexpectedly cut rates, which leant further support to the Aussie as AUD/NZD was driven sharply higher. Traders will be keen to see the RBA March meeting minutes this week.

CADCrude oil managed to break above the key $38 resistance level, as optimism for a proposed OPEC production freeze continues to keep price supported as short positions are squared. This move supported the Canadian dollar over the week, which also benefitted from the BOC deciding to keep rates unchanged alongside a surpisngly upbeat policy statement. In contrast, Canadian employment data on Friday was weaker than expected, with the unemployment rate increasing to 7.3% from 7.2%.

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