Forecasting the upcoming week: What if the ECB… and US CPI…?

A dreadful week saw the US Dollar (USD) navigate choppy waters, going from the area of three-week tops to multi-day lows in hours and eventually leaving the scales tilted toward the negative side. Who to blame? The bond market? The MoF-BoJ duo? Unabated geopolitical tensions? The Fed?

The US Dollar Index (DXY) closed the week with marked losses, coming under fresh selling pressure soon after challenging the psychological 100.00 barrier earlier in the week and attempting to stabilise around the 99.00 neighbourhood on Friday. There will be no activity in the US markets on Monday due to the Labor Day holiday. So, the data flow kick in on September 8 with the release of the NFIB Business Optimism Index, seconded by Consumer Inflation Expectations and the ADP Employment Change Weekly. On September 9 will come the usual MBA Mortgage Applications prior to the API’s weekly report on US crude inventories. The usual weekly Initial Jobless Claims, Producer Prices, Existing Home Sales and the EIA’s weekly report on US crude oil stockpiles are all due on September 10. Wrapping up the docket, the Inflation Rate will take centre stage, followed by the flash U-Mich Consumer Sentiment and the Monthly Budget Statement. 

EUR/USD traded with a positive bias this week, partially reversing its previous retracement, although falling significantly of any attempt to regain the 1.1700 hurdle. The quarterly Employment Change data in the euro area is due on September 7 alongside another revision of the Q2 GDP Growth Rate in the bloc. Germany’s Trade Balance results will be released on September 8. The final Inflation Rate in Germany is due on September 10, followed by the ECB monetary policy meeting and press conference.

GBP/USD ended the week in the middle of the range, hovering around the mid-1.3500s and adding to the prior retracement. The Lloyds House Index comes on September 7 prior to the speech by Chancellor Healey. Moving forward, the BRC Retail Sales Monitor will be published on September 8 ahead of the RICS House Price Balance on September 10. A packed docket is expected on September 11 with the releases of GDP figures, Trade Balance, Industrial and Manufacturing Production, Construction Output and the NIESR Monthly GDP Tracker.

Behold this week’s outperformer: the Japanese Yen. Indeed, USD/JPY retreated sharply to the area of seven-month lows near 155.00, following market chatter about further tightening by the BoJ. The preliminary Coincident and Leading Economic indexes are due on September 7 along with Foreign Exchange Reserves figures. Average Cash Earnings, Current Account balance, Bank Lending data, the Eco Watchers Survey and the final Q2 GDP Growth Rate are expected on September 8. Machine Tool Orders are due on September 9, while the weekly Foreign Bond Investment figures are expected on September 10. Closing the domestic calendar on September 11 will come Producer Prices, the Reuters Tankan Index and the BSI Large Manufacturing gauge.

AUD/USD resumed its upside, reclaiming the area beyond the key 0.7200 barrier. It is worth noting that the Aussie closed with weekly gains in eight out of the last ten weeks, gaining more than 3 cents since late June. Westpac will publish its Consumer Confidence measure on September 8, alongside Building Permits, Private House Approvals and the NAB Business Confidence data. On September 10 will come the Consumer Inflation Expectations.

Anticipating economic perspectives: Voices on the horizon

• The RBA’s Hunter and Hauser are due to speak on September 8.
• The ECB’s Nagel speaks on September 9.
• The ECB’s Lagarde will speak on September 12.

Central banks: Upcoming meetings to shape monetary policies

• The ECB will decide on rates on September 10 (2.25% act, 2.50% exp).