The greenback signed off last week on a stronger note against the other majors, but whether this momentum can carry on this week will depend upon how strong or otherwise the upcoming data points are from the US, with an eye on the Fed outlook.
The US economic calendar this week is a busy one, with Consumer Confidence (Tuesday), Preliminary GDP (Wednesday), Core PCE Price Index and Personal Spending (Thursday) all on deck, and while consensus expectations are that we will see a rate hike in December from the FOMC, the upcoming data set could very well have implications for the rate hike cycle in 2019.
Additionally, Jerome Powell will be speaking this week and as usual, when the Federal Reserve Chairman speaks the market will be listening attentively for dovish or hawkish leanings from the central bank, whilst the FOMC Meeting Minutes will also be released on Thursday.
Last week the US Dollar saw buyers looking for safe-haven amid the risk-off sentiment on Wall Street. We could see more of that again, but with so many data points due this week, we’d expect interest rate expectations to equally important in determining the direction of the USD.
This won’t come as too much of a shock, but the performance of the British Pound this week will be directly linked with the ongoing Brexit proceedings. Whilst the EU leaders officially approved the Brexit agreement at a summit over the weekend (as expected), Prime Minister Theresa May still faces the considerable challenge of getting her parliamentary colleagues to pass the draft deal. GBPUSD movements this week will be subject to the latest headlines, speculation and comments by officials on both sides of the aisle in parliament, and as such the currency will remain highly news-driven.
The Euro ended last week on a downer after Eurozone PMI figures underwhelmed (and in particular the PMI’s from Germany which were at multi-year lows). This saw the single currency fall half a percent against the USD on Friday. Looking ahead, ECB President Mario Draghi has a couple of speaking engagements this week (Monday and Thursday) while Flash CPI numbers are due Friday.
In Australia, a speech by RBA Governor Lowe is due Monday, while Capex data on Thursday could provide some intraday volatility. The AUDUSD rate slipped lower on Friday, and any potential rebound towards the US$0.73 could depend upon a turnaround in the negative market sentiment that afflicted markets for much of last week.
A full list of this week’s economic data releases can be found here.
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies