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October 23, 2017

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Forex Outlook:  The pair started the week in negative owing to the heightened political risk in Spain wherein the Spanish government gave Catalan President until Thursday to renounce the declaration of independence. Madrid also threatened to trigger Article 155 of the Spanish constitution if Puigdemount refused which would allow the central government to impose direct rule and disband Catalan Parliament.

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In the week ahead, the key economic event is the latest interest rate decision by ECB which is expected to be announced on Thursday. The market would be looking ahead to the exact plan and timeline for the QE tapering. The current program of ECB expires in December and as per various reports, there has been a debate amongst the policymakers towards the reduction in the size of bond purchase from 60 billion euros per month to somewhere between 25-40 billion euros. The duration is expected to be extended by 6-9 months.

In addition, US is expected to release its Durable goods data on Wednesday followed by Q3 GDP release on Friday. According to the recent economic releases from the US, jobless claims hit its lowest levels in 4 decades which signal strength in payroll, manufacturing activity has seen an improvement. There is a slowdown expected in the Q3 growth but the recovery in trade activity and retail sales are expected to keep it low.

Weekly Forex Outlook of USDJPY

 

Forex Outlook:  The pair started the week in positive on the back of the fact that Fed Chair Janet Yellen presented a positive outlook for the economy of US and the prospects of inflation in the months to come over the weekend. She said that there would be an impact on economic growth due to the recent hurricanes but it would be temporary and expected the economy to rebound by the end of the year. 

The risk appetite remained strong during the week as the market didn’t hear any new comments from North Korea and regardless of the weaker housing starts and building permits data. Adding to the strength was the release of the Beige Book on Wednesday which showed that the Fed districts reported widespread tightness in labor market.

At the end of the week, the dollar received a positive up move owing to the fact that the US Senate received sufficient votes to adopt a budget resolution which is a step advancing tax overhaul. This was seen as a significant step to get the tax reforms in place and provide a huge opportunity for growth over the next few years. In addition, the news that US President Trump advisers are said to be leaning towards Taylor or Powell (Hawks) as the next Fed Chair added onto the dollar strength.

In the week ahead, Japan is expected to hold the general election over the weekend and the current Prime Minister is expected to hold the office followed by the release of CPI data on Friday. In addition, US is expected to release its Durable goods data on Wednesday followed by Q3 GDP release on Friday. According to the recent economic releases from the US, jobless claims hit its lowest levels in 4 decades which signal strength in payroll, manufacturing activity has seen an improvement. There is a slowdown expected in the Q3 growth but the recovery in trade activity and retail sales are expected to keep it low.

Weekly Forex Outlook of USDCAD

Forex Outlook: The pair started the week in positive on the back of the fact that Fed Chair Janet Yellen presented a positive outlook for the economy of US and the prospects of inflation in the months to come over the weekend. She said that there would be an impact on economic growth due to the recent hurricanes but it would be temporary and expected the economy to rebound by the end of the year.

The weakness in the Canadian dollar was further added as the NAFTA pact came in focus from US President Trump who stated that it has been terrible for the US economy and vowed to renegotiate the deal.

At the end of the week, the dollar received a positive up move owing to the fact that the US Senate received sufficient votes to adopt a budget resolution which is a step advancing tax overhaul. This was seen as a significant step to get the tax reforms in place and provide a huge opportunity for growth over the next few years. In addition, the news that US President Trump advisers are said to be leaning towards Taylor or Powell (Hawks) as the next Fed Chair added onto the dollar strength.

On Friday, CAD fell hard owing to the softer economic reports in the form of Retail sales which fell -0.3% against the expectations of a rise of 0.5% and the CPI for the month of September increased by2% against the expectation of a rise of 0.3%. These numbers will be looked carefully by the BoC and would maintain a cautious bias with regards to a further rate hike during this year.

In the week ahead, the key economic event is the latest interest rate decision by Bank of Canada which is expected to be announced on Wednesday. After the two recent hikes of 25bps, BoC is expected to keep the rates unchanged at the October meeting. However, the market would be looking ahead to the statement which might indicate the possibility of a rate hike in the December meeting.

In addition, US is expected to release its Durable goods data on Wednesday followed by Q3 GDP release on Friday. According to the recent economic releases from the US, jobless claims hit its lowest levels in 4 decades which signal strength in payroll, manufacturing activity has seen an improvement. There is a slowdown expected in the Q3 growth but the recovery in trade activity and retail sales are expected to keep it low.

 

Weekly Forex Outlook of GBPUSD

Forex Outlook: The pair started the week in negative on the back of the fact that Fed Chair Janet Yellen presented a positive outlook for the economy of US and the prospects of inflation in the months to come over the weekend. Adding to the weakness in the pair was were the reports that the Brexit talks could collapse unless the European Union concedes on some key issues.

During the week, BoE Governor Carney suggested that inflation might peak around 3% in the month of October and said that the firms were less confident regarding a smooth Brexit. Another member of BoE, Ramsden, and Tenreyro talked about the spare capacity, slack and inflation peaking which added to the weakness in the GBP.

From the data front, the CPI for the month of September grew by 0.3% as per the expectations but was slower as compared to the previous month’s increase of 0.6%. The employment data released on Wednesday indicated that the wage growth was stronger than the expectations but the jobless claims increased at the pace of 1.7k for the month of September against the expectations of a rise of 1k. Lastly, the retail sales fell to -0.8% in the month of September as the subdued wage growth and rising inflation lowered the spending power of the consumer.

At the end of the week, the dollar received a positive up move owing to the fact that the US Senate received sufficient votes to adopt a budget resolution which is a step advancing tax overhaul. This was seen as a significant step to get the tax reforms in place and provide a huge opportunity for growth over the next few years. In addition, the news that US President Trump advisers are said to be leaning towards Taylor or Powell (Hawks) as the next Fed Chair added onto the dollar strength.

In the week ahead, GBP is expected to release its Q3 GDP figures on Wednesday. In addition, US is expected to release its Durable goods data on Wednesday followed by Q3 GDP release on Friday.

According to the recent economic releases from the US, jobless claims hit its lowest levels in 4 decades which signal strength in payroll, manufacturing activity has seen an improvement. There is a slowdown expected in the Q3 growth but the recovery in trade activity and retail sales are expected to keep it low. Moreover, in the UK, with the wage growth still struggling to keep up with the rise in inflation, there are concerns with respect to the consumer-driven economic growth of UK.

Weekly Forex Outlook of AUDUSD

Forex Outlook: The pair started the week in negative on the back of the fact that Fed Chair Janet Yellen presented a positive outlook for the economy of US and the prospects of inflation in the months to come over the weekend. Adding to the weakness in the pair was were the reports that the Brexit talks could collapse unless the European Union concedes on some key issues.

The pair came under pressure post the release of the RBA’s October policy meeting minutes which stated that any change in the policy would be dependent on the economic conditions prevailing domestically and wouldn’t be influenced by the tighter monetary policy elsewhere. It also stated that “An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.”

The pair observed strength on Thursday after the release of the employment report which stated that Australia added 19.8k jobs during the month of September with a firm rise in both full and part-time employment. This helped in pushing the rate of unemployment down to 5.5% which was lowest in more than 3 years. At the same time, there was a growth observed in the retail sales and industrial production against the expectations for the month of September from China which further fuelled the strength in the pair.

At the end of the week, the dollar received a positive up move owing to the fact that the US Senate received sufficient votes to adopt a budget resolution which is a step advancing tax overhaul. This was seen as a significant step to get the tax reforms in place and provide a huge opportunity for growth over the next few years. In addition, the news that US President Trump advisers are said to be leaning towards Taylor or Powell (Hawks) as the next Fed Chair added onto the dollar strength.

In the week ahead, Australia is expected to release its inflation report on Wednesday. In addition, US is expected to release its Durable goods data on Wednesday followed by Q3 GDP release on Friday.

According to the recent economic releases from the US, jobless claims hit its lowest levels in 4 decades which signal strength in payroll, manufacturing activity has seen an improvement. There is a slowdown expected in the Q3 growth but the recovery in trade activity and retail sales are expected to keep it low.

Weekly Forex Outlook of USDCHF

Forex Outlook: The pair started the week in positive on the back of the fact that Fed Chair Janet Yellen presented a positive outlook for the economy of US and the prospects of inflation in the months to come over the weekend. She said that there would be an impact on economic growth due to the recent hurricanes but it would be temporary and expected the economy to rebound by the end of the year.

The risk appetite remained strong during the week as the market didn’t hear any new comments from North Korea and regardless of the weaker housing starts and building permits data. Adding to the strength was the release of the Beige Book on Wednesday which showed that the Fed districts reported widespread tightness in labor market.

At the end of the week, the dollar received a positive up move owing to the fact that the US Senate received sufficient votes to adopt a budget resolution which is a step advancing tax overhaul. This was seen as a significant step to get the tax reforms in place and provide a huge opportunity for growth over the next few years. In addition, the news that US President Trump advisers are said to be leaning towards Taylor or Powell (Hawks) as the next Fed Chair added onto the dollar strength.

In the week ahead, Switzerland is expected to release UBS Consumer indicator for the month of September on Wednesday. In addition, US is expected to release its Durable goods data on Wednesday followed by Q3 GDP release on Friday. According to the recent economic releases from the US, jobless claims hit its lowest levels in 4 decades which signal strength in payroll, manufacturing activity has seen an improvement. There is a slowdown expected in the Q3 growth but the recovery in trade activity and retail sales are expected to keep it low.

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