Global Markets will turn Attention to Central Bank Announcements
Monday 11 June, 2018
Daily Currency UpdateIt is a busy week ahead with the Singapore summit happening today and central bankers setting policy. President Trump will meet North Korean Leader Kim Jung Un. The Federal Reserve meets on Wednesday, on Thursday, we have the ECB meeting outlining how it will unwind its asset purchasing program. The week will end with the Bank of Japan and its policy meeting on Friday.
Markets now turn their attention to a plethora of key economic releases this week. Arguably, the main event for investors and traders will be the FOMC meeting on Wednesday afternoon with markets having priced in an 85% chance of a rate hike. The market participants will be focused on the Fed’s projection on the future path of interest rates. A forecast of four rate hikes this year would most likely already be priced in, but if the Fed suggests faster rate hikes in 2019 than previously anticipated, that could destabilize the market.
Key MoversThe G7 meeting this weekend was in line with economist expectations, with President Trump ejecting the closing communique of the meetings. Trump on his flight to Singapore to meet North Korean Leader Kim Jong Un ordered his staff not to sign the communique, because of Trudeau’s false statements. There has very little that Trudeau said at the summit that he has not already said leading into the G7 Summit. Trudeau has said Canada will add tariffs of its own in retaliation for duties put on Canadian goods enter the United States.
The Canadian dollar through all of this weekend’s rhetoric opens slightly dovish as a trade war would be a hindrance to economic growth in Canada. The loonie sits at the 1.3000 handle heading into the North American open.
The economic calendar for Canada is very light this week with medium tier data out Thursday and Friday with New Housing Price Index and Foreign Security Purchases respectively
EUR/USD is pushing higher this morning fueled by a growing sense that the ECB will signal an end or at least announce that it will begin to taper its QE program on Thursday. A flurry of comments from crucial ECB officials last week has been the catalyst. EUR/USD has held key resistance at the 1.18 handle and opens in North America at the big figure.
As far as the euro is concerned, the main event will be the ECB meeting on Thursday, but we are also due German ZEW (economic sentiment) on Tuesday and European inflation data on Friday.
It was a lackluster end to the week last week. GBP/USD was steady for most of the day on Friday, trading just above the 1.34 figure for a lot of it. Without much in the way of major economic data, markets were more concerned about what the G7 meeting might bring. The conference itself was civil, but events since have been anything but as the US Government and critical allies continue their war of words on trade. In fact, some of it has been verging on getting personal, with Trump most recently tweeting that Canadian PM Trudeau “acts hurt when called out.”
With this, risk sentiment took a hit early on this morning, and commodity currencies gapped lower when markets opened. Since then, the greenback has weakened, and GBP/USD is pushing higher in London, and so it seems the G7 spat is being shrugged off ahead of a particularly important and data-heavy week this week.
Overnight we had UK Manufacturing Production, followed by UK average earnings and employment data at the same time tomorrow. US CPI (inflation) tomorrow afternoon, UK CPI on Wednesday morning and the UK and US Retail Sales on Thursday. Not to mention the ECB meeting on Thursday, at which point we expect to get more details on a plan to taper QE, the US FOMC meeting on Wednesday, at which the Fed is expected to raise interest rates, and the US/North Korea meeting; possibly laying the groundwork for ending a nuclear stand-off between the old foes. It all makes for a potentially volatile next few days.
It was a public holiday in Australia today, so trading conditions were a little thin in AUD/USD overnight. The pair blipped as investors sold risk post the G7 meeting and war of words, but it’s since recovered vs. a weakening greenback in London.
The Aussie dollar, like most other commodity currencies, will likely be affected by a host of external economic data and events this week. Although the local calendar for the week isn’t as busy as last week, there’s still a bit, including NAB Business Confidence on Tuesday and employment data on Thursday.
The Kiwi has traded much in the footsteps of the Aussie dollar in the last 12 hours or so. Again, with the Australian market closed, trading has been relatively subdued overnight. The data docket is looking a bit light this week too for the NZD, with only the Business NZ Manufacturing Index due for release on Thursday. That’s not to say it will be a quiet next few days for the currency, with a whole host of external market influences due.
- USD/CAD: 1.2965 - 1.3069 ▲
- EUR/USD: 1.1750 - 1.1823 ▼
- GBP/USD: 1.3340 - 1.3444 ▼
- AUD/USD: 0.7580 - 0.7625 ▼
- NZD/USD: 0.7015 - 0.7048 ▼