Weekly Forex Outlook (October 16-20, 2017)
October 16, 2017

Weekly Forex Outlook of EURUSD

 

Forex Outlook:  The pair gains in the early part of the week despite the growth of political uncertainty in Europe revolving around the Catalan government. The strength in the pair was fuelled by the industrial production data released by Germany for the month of August which showed that the economy of the nation has returned to growth and has overcome the seasonal decline. The industrial production grew by 2.6% for the month of August compared with 0.7% rise in July. The political uncertainty around Catalan government eased during the week when Rajoy gave the Catalan government about 8 days to drop the independence bid or he will rule the region directly by rescinding the political autonomy. The FOMC meeting minutes released on Wednesday added onto the dollar weakness as the report pointed out that “many Fed officials were concerned that the low inflation is not transitory” and a few members wanted to delay the rate hike until the inflation ticked higher.

On Friday, even though the Consumer Price index increased by 0.5% in September, the prices excluding the food and energy only increased by 0.1% as compared to the rise of 0.2% last month which suggested that the disinflationary forces were still in play. In addition, there was a rise in retail sales by 1.6% which is the highest since March 2015 but spending excluding auto and gas only increased by 0.5%.

In the week ahead, EU is expected to release its Consumer price index numbers for the month of September on Tuesday followed by an EU Extraordinary Economic Summit on Wednesday. In addition, US is expected to release its Industrial Production data for the month of September on Tuesday followed by Housing Starts data on Wednesday. A rate hike by fed during December is almost priced in by the market and even though the latest dot-plot by the Federal Reserve show a possibility of 3 hikes in 2018, the Fed-fund futures only show a 70% chance of just one rate hike during 2018 which puts the dollar index under pressure.

Weekly Forex Outlook of USDJPY

 

Forex Outlook:  The pair observed weakness during the beginning of the week on the back of the geopolitical concerns wherein North Korea informed Russia that it had an intercontinental missile which is capable of traveling 3000 km and that puts it within the reach of the US territory. The concerns were further attributed to the cryptic comments made by Trump about the “calm before the storm”. In addition, a report by the Bank of Japan noted that the exports of the nation were firm and construction and consumer spending had strengthened which added to the weakness in the pair. The FOMC meeting minutes released on Wednesday added onto the dollar weakness as the report pointed out that “many Fed officials were concerned that the low inflation is not transitory” and a few members wanted to delay the rate hike until the inflation ticked higher.

On Friday, even though the Consumer Price index increased by 0.5% in September, the prices excluding the food and energy only increased by 0.1% as compared to the rise of 0.2% last month which suggested that the disinflationary forces were still in play. In addition, there was a rise in retail sales by 1.6% which is the highest since March 2015 but spending excluding auto and gas only increased by 0.5%.

In the week ahead, Japan is expected to release Tarde Balance data on Wednesday. In addition, US is expected to release its Industrial Production data for the month of September on Tuesday followed by Housing Starts data on Wednesday. A rate hike by fed during December is almost priced in by the market and even though the latest dot-plot by the Federal Reserve show a possibility of 3 hikes in 2018, the Fed-fund futures only show a 70% chance of just one rate hike during 2018 which puts the dollar index under pressure. 

Weekly Forex Outlook of USDCAD

Forex Outlook:  The Canadian dollar was well supported by the strong oil prices during the week. There was no major economic data release from Canada during the last week but firm oil prices placed an additional pressure on dollar index and helped the pair to push across the 1.25 region. The FOMC meeting minutes released on Wednesday added onto the dollar weakness as the report pointed out that “many Fed officials were concerned that the low inflation is not transitory” and a few members wanted to delay the rate hike until the inflation ticked higher.

On Friday, even though the Consumer Price index increased by 0.5% in September, the prices excluding the food and energy only increased by 0.1% as compared to the rise of 0.2% last month which suggested that the disinflationary forces were still in play. In addition, there was a rise in retail sales by 1.6% which is the highest since March 2015 but spending excluding auto and gas only increased by 0.5%.

In the week ahead, BoC is expected to release its Business Outlook Survey on Monday, followed by Retail sales data on Friday. In addition, US is expected to release its Industrial Production data for the month of September on Tuesday followed by Housing Starts data on Wednesday. A rate hike by fed during December is almost priced in by the market and even though the latest dot-plot by the Federal Reserve show a possibility of 3 hikes in 2018, the Fed-fund futures only show a 70% chance of just one rate hike during 2018 which puts the dollar index under pressure.

 

Weekly Forex Outlook of GBPUSD

Forex Outlook:  UK manufacturing output is up 0.4% m/m and 2.8% y/y, better than projected. The wider industrial production is up 0.2% as expected but 1.6% y/y, beating expectations.

 

During the early part of the week, the pair observed some strength regardless of the pessimistic forecasts from some analysts and the Bank of England, the British economy seemed to be in a good shape. However, the European and the British negotiators remain far apart on key issues like the amount the UK has to pay when it leaves EU making the Brexit talks quite difficult. During the week, Michel Barnier the top negotiator from EU said that the Brexit talks were in a deadlock over the divorce bill of Britain which instantly saw weakness in the pound but later the talks regarding the 2-year transition offer helped the pound to regain its strength.  

In addition, the FOMC meeting minutes released on Wednesday added onto the dollar weakness as the report pointed out that “many Fed officials were concerned that the low inflation is not transitory” and a few members wanted to delay the rate hike until the inflation ticked higher.

On Friday, even though the Consumer Price index increased by 0.5% in September, the prices excluding the food and energy only increased by 0.1% as compared to the rise of 0.2% last month which suggested that the disinflationary forces were still in play. In addition, there was a rise in retail sales by 1.6% which is the highest since March 2015 but spending excluding auto and gas only increased by 0.5%.

In the week ahead, UK is expected to release its CPI and PPI data for the month of September on Tuesday followed by employment numbers on Wednesday and Retail Sales data on Thursday. In addition, US is expected to release its Industrial Production data for the month of September on Tuesday followed by Housing Starts data on Wednesday. A rate hike by fed during December is almost priced in by the market and even though the latest dot-plot by the Federal Reserve show a possibility of 3 hikes in 2018, the Fed-fund futures only show a 70% chance of just one rate hike during 2018 which puts the dollar index under pressure.

Weekly Forex Outlook of AUDUSD

Forex Outlook: The pair started the week in negative owing to the comments by RBA board member Ian Harper last Friday that he wouldn’t rule out a rate cut due to the poor retail sales data and current inflation data which was below the target rate of RBA. The pair observed strength during the week on the back of a strong business confidence announced by NAB which was at 7 points as compared to 5 points last time. According to Westpac, the Consumer sentiment also advanced to 3.6% for the month of October. The FOMC meeting minutes released on Wednesday added onto the dollar weakness as the report pointed out that “many Fed officials were concerned that the low inflation is not transitory” and a few members wanted to delay the rate hike until the inflation ticked higher. Adding onto the strength in the pair was the rise in Consumer Inflation Expectations from Australia for the month of October which stood at 4.3% vs 3.8% (previous).

On Friday, even though the Consumer Price index increased by 0.5% in September, the prices excluding the food and energy only increased by 0.1% as compared to the rise of 0.2% last month which suggested that the disinflationary forces were still in play. In addition, there was a rise in retail sales by 1.6% which is the highest since March 2015 but spending excluding auto and gas only increased by 0.5%.

In the week ahead, RBA is expected to release its latest policy meeting minutes on Tuesday followed by the employment data on Thursday. In addition, US is expected to release its Industrial Production data for the month of September on Tuesday followed by Housing Starts data on Wednesday. A rate hike by fed during December is almost priced in by the market and even though the latest dot-plot by the Federal Reserve show a possibility of 3 hikes in 2018, the Fed-fund futures only show a 70% chance of just one rate hike during 2018 which puts the dollar index under pressure.

 

Weekly Forex Outlook of USD/CHF

 

The pair observed weakness during the beginning of the week on the back of the geopolitical concerns wherein North Korea informed Russia that it had an intercontinental missile which is capable of traveling 3000 km and that puts it within the reach of the US territory. The concerns were further attributed to the cryptic comments made by Trump about the “calm before the storm”. In addition, the unemployment rate of Switzerland for the month of September stood at 3.1% compared to the expectation of 3.2% which added to the weakness in the pair.  

FOMC meeting minutes released on Wednesday added onto the dollar weakness as the report pointed out that “many Fed officials were concerned that the low inflation is not transitory” and a few members wanted to delay the rate hike until the inflation ticked higher.

On Friday, even though the Consumer Price index increased by 0.5% in September, the prices excluding the food and energy only increased by 0.1% as compared to the rise of 0.2% last month which suggested that the disinflationary forces were still in play. In addition, there was a rise in retail sales by 1.6% which is the highest since March 2015 but spending excluding auto and gas only increased by 0.5%.

There are no major economic releases from Switzerland in the week ahead. However, US is expected to release its Industrial Production data for the month of September on Tuesday followed by Housing Starts data on Wednesday. A rate hike by fed during December is almost priced in by the market and even though the latest dot-plot by the Federal Reserve show a possibility of 3 hikes in 2018, the Fed-fund futures only show a 70% chance of just one rate hike during 2018 which puts the dollar index under pressure.