Let’s take a look at some of the key fundamental releases this week that might move the forex markets.
RBA Monetary Policy Meeting Minutes – The Reserve Bank of Australia will release its minutes for the RBA meeting a couple of weeks ago. We can expect some mention of how the strong Aussie is holding back the economy, which should pressure the AUD at least in the short-term.
UK CPI y/y July- Forecast: 1.8%, Previous: 1.9% – With inflation expected to have cooled slightly in July, the Bank of England will likely hold off raising rates until 2015. Expect a strong reaction to an inflation reading that surprises either to the upside or downside.
US CPI m/m July – Forecast: 0.1%, Previous: 0.3%
Core PI m/m July – Forecast: 0.2%, Previous 0.1% – The FOMC is concerned with wage growth, like the BoE. If inflation data does soften as expected, the USD might pare some of its recent gains.
RBA Gov. Glenn Stevens is scheduled to testify before the House of Representatives’ Standing Committee on Economics. Look for more jawboning about the strong Aussie, which can have a bearish impact on the AUD.
Bank of England Meeting Minutes can if how the Monetary Policy Committee is leaning toward a rate hike to be in 2015, or 2014. The committee has heightened concerns on a lack of wage growth, which was evident in data for Q2. If the tone is that a 2014 rate hike will be improbable, expect some bearish pressure on the GBP, though it has recently been pricing in the prospect of a rate hike to be in 2015 instead of 2014.
US FOMC Meeting Minutes is not likely going to be that significant. The fed has been avoiding setting a time-line for its rate hike, which most would project to be mid-2015. But if the FOMC heightens concern for Q3 growth, the time-line for a rate hike might shift towards second half of 2015.
Flash Manufacturing and Services PMI data for the Eurozone for August might reaffirm the slowdown in the region’s economic recovery. The most important data point is probably going to be Germany’s:
Flash Manufacturing PMI – Forecast: 51.8, Previous 52.4
Flash Services PMI – Forecast 53.6, Previous 54.2
Even if readings are as expected, they are disappointing in the general scheme of things and should keep pressure on the euro.
UK Retail Sales m/m July – Forecast: 0.4%, Previous 0.1%
The forecast calls for a nice rebound about a couple of disappointing months. (May: -0.5%, June: 0.1%). Don’t expect too much reaction on this, even if data beats forecast, unless its drastic like 1.0%. On the other hand, with the GBP already pressured, the market might react negatively to a reading that misses the 0.4% average forecast.
US Jobless Claims – Forecast 299K, Previous 311K – Jobs data have been improving, and Jobless claims has been hovering right around 300K throughout Q2 and Q3 so far. The emphasis has shifted now to wage growth, so just improvement in employment numbers might not be enough to keep the USD in strength.
Canada CPI m/m – Forecast: -0.1%, Previous 0.1%
Core CPI m/m – Forecast: 0.0%, Previous: -0.1% – We saw disinflation in June, and economists do not expect inflation to pick up in July. Data that continues to reflect disinflation can push the CAD even lower than its descent in this past month.
Janet Yellen will speak about the labor market at Jackson Hole, in the second day of the gathering of central bankers. Watch for her tone on wage concerns. This can have huge implication on how the market projects the FOMC’s rate hike (whether before or after mid-2015).
Mario Draghi will speak after Janet Yellen at Jackson Hole and will probably speak more on the lack of growth in the Eurozone.
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