Here’s a look at the day’s key fundamental releases, and their likely impact on the global currency markets.
US Core Durable Goods
The day’s headline figure is the latest US core durable goods data, scheduled for release as the US opens for business. The figure represents the change in the total value of new orders for durable goods, which are heavy duty goods defined as having an expected life cycle in excess of three years. Things like white goods, televisions and machinery all fall under the durable goods category. The core figure – the focus of this section – excludes transportation items from the data to smooth it out. Traders watch the release because generally, individuals and companies only buy durable goods when they expect the economy to improve. For this reason, it can be a great leading indicator, and offer insight into the potential for monetary policy tightening (which is something of a hot topic in the US at present).
Consensus forecasts the release at 0.6% growth, so expect a release lower than 0.6% to weaken the USD versus its major counterparts, and conversely, a release higher than 0.6% to strengthen the currency.
Japan National Core CPI
The next big release after the US durable goods data is the latest bout of Japanese inflation data. The core consumer price index (CPI) figure measures the change in price of a basket of goods and services, excluding fresh food. Japanese Prime Minister Shinzo Abe has been implementing an aggressive easing policy since the end of 2012, dubbed Abenomics, with the primary goal of boosting the Japanese economy and avoiding deflation. For this reason, traders will watch the CPI data closely to gauge the effectiveness of Abenomics. A higher than expected reading will raise the potential for a tightening of the policies (and for an interest rate hike), so look for a reading above the forecast 1.4% to strengthen the Japanese yen versus its major counterparts. Conversely, look for a miss to weaken the currency.
To contact the reporter of this story: Samuel Rae at Samuel@forexminute.com