Weekly Forex Outlook (October 2-6, 2017)
October 2, 2017

Weekly Forex Outlook of EURUSD

The Outcome of German elections resulted in huge EURO sell off as the pair was seen falling 220 pips in the first half of the week. Merkel’s victory was well anticipated, however, the failure of her party to claim the victory with the majority have created doubts over the formation of a parliament. The SPD said they are “united in remaining in opposition” and If the party stays firm in their decision, Merkel will have a very hard job in building a coalition. The rising uncertainty over parliament formation gave an opportunity to the sellers to drag down the price from 1.1930 level to 1.1717. The USD strengthened across the board after an announcement of details on the Tax reform bill. Trump administration’s latest Tax reform bill will allow $1.5 trillion in tax cuts over a decade. The proposed framework which is a joint product of the Trump administration and Republican leadership, calls for lowering the corporate rate from 35 to 20 percent. Besides, the plan would also collapse the current seven personal tax brackets to just three: 12, 25 and 35 percent and nearly doubles the standard deduction. 

The upcoming week features crucial data from both the sides. The ECB monetary policy meeting minutes is to be released on Thursday and the investors are expected to follow the minutes closely to get more details on the speculated tapering.  The week will be kickstarted by Euro and US Manufacturing PMI’s and the pair is expected to remain volatile on Monday.

Weekly Forex Outlook of USDJPY

The biggest driver for USD in the past week has been Tax reform bill announcement. The announcement of the details on proposed Tax reform bill by the Trump administration made the markets optimistic that the President will now get the things done. Trump administration’s latest Tax reform bill will allow $1.5 trillion in tax cuts over a decade. The proposed framework which is a joint product of the Trump administration and Republican leadership, calls for lowering the corporate rate from 35 to 20 percent. Besides, the plan would also collapse the current seven personal tax brackets to just three: 12, 25 and 35 percent and nearly doubles the standard deduction. Japan is expected to be holding snap elections in October and the opinion polls are expected to move Yen a bit, however, the tax reform bill and the US data will remain the prime interest to investors. The data from the US was supportive, with Durable Goods orders rising 1.7% against the expected 1% and the Q2 GDP was revised up to 3.1% from 3%. 

The upcoming week will feature Tankan larger manufacturing index ISM manufacturing PMI on Monday, ADP employment data on Wednesday and Nonfarm payrolls on Friday. The improved political and economic scenario after Trump’s Tax reform announcement and Fed’s balance sheet reduction is expected to strengthen USD further

Weekly Forex Outlook of USDCAD

The pair was well supported by the fundamental drivers from the US and extended its gains last week, breaking above 1.2350 level to close the week near 1.2500 regions.

Fed Yellen’s hawkish comments stating that a gradual approach to rate hikes is appropriate and Trump administration’s announcement of Tax reform that calls for lowering the corporate rate from 35 to 20 percent. Besides, the plan would also collapse the current seven personal tax brackets to just three: 12, 25 and 35 percent and nearly doubles the standard deduction. The US Durable goods orders rose 1.7% against the expected 1% and the Q2 GDP was revised up to 3.1% from 3%. On the other hand, CAD came under selling pressure after Bank of Canada Governor Poloz’s cautious approach, where he stressed on further data evidence to comment on further rate hikes. The Dovish comments from Poloz reduced the odds of an October BoC rate hike from 46% to 30%. On the economic data front, CAD GDP dropped to 0% against the expected 0.1%.

This economic data to look forward to in the next week are US ISM manufacturing PMI, Yellen’s speech, ADP employment data, Nonfarm payrolls, and Unemployment rate. Canada will also release its Unemployment Rate, Net Change in Employment and PMI numbers.

Weekly Forex Outlook of GBPUSD

The USD strengthening was quite evident as the pair was seen falling 220 pips on improved political and economic situation in the US. Besides, Brexit uncertainties weigh down the GBP amid lack of key fundamental drivers. The pair extended its losses and closed the week below the 1.34 level at 1.339, posting a second consecutive weekly loss. The USD strengthened after Fed Yellen’s hawkish comments stating that a gradual approach to rate hikes is appropriate and Trump administration’s announcement of Tax reform that calls for lowering the corporate rate from 35 to 20 percent. Besides, the plan would also collapse the current seven personal tax brackets to just three: 12, 25 and 35 percent and nearly doubles the standard deduction. The data from the US was supportive, with Durable Goods orders rising 1.7% against the expected 1% and the Q2 GDP was revised up to 3.1% from 3%.  The pound fell further after UK GDP missed the expectations with actual GDP at 1.5% against the expected 1.7%, lowest since November 2013.

This upcoming week will see US releasing its Manufacturing PMI and employment numbers, while the economic calendar for the UK looks light, with only UK manufacturing PMI and construction data up for release.

 

Weekly Forex Outlook of AUDUSD

AUDUSD was clearly in the downtrend last week amid lack of fundamental drivers from AUD and USD strengthening. The pair was seen falling nearly 140 pips and closed the week at 0.782, posting a third consecutive weekly loss. AUD came under selling pressure after RBA governor Philips lowe showed concerns over the impact of strong AUD on the Inflation. The USD strengthened after Fed Yellen’s hawkish comments stating that a gradual approach to rate hikes is appropriate and Trump administration’s announcement of Tax reform that calls for lowering the corporate rate from 35 to 20 percent. Besides, the plan would also collapse the current seven personal tax brackets to just three: 12, 25 and 35 percent and nearly doubles the standard deduction. The data has also been well supportive of USD, with US Durable goods orders rising 1.7% against the expected 1% and the Q2 GDP was revised up to 3.1% from 3%.

 

The upcoming week will feature RBA Interest Rate Decision. The central bank is expected to keep the rates unchanged as it was quite evident from governor Lowe’s comments the board is not happy with AUD strengthening as it will have a negative impact on the exports and Inflation. Amid Closed Chinese markets, the AUD retail sales and Trade balance is also expected to move the price. The US will release its ISM manufacturing PMI on Wednesday and employment data on Friday. The improved political and economic situation in the US is expected to strengthen USD further

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