Weekly Forex Outlook (October 30- November 03, 2017)
October 30, 2017

Weekly Forex Outlook of EURUSD

 

Forex Outlook:  GDP for Q3  beat the market expectations and the same was observed during the week as the US economy expanded at a pace of 3% (annualized rate) which indicates that there is a strong demand from businesses and consumers despite the hit from hurricanes Irma and Harvey. In addition, the imminent announcement of a Fed Chair pick which is expected to be narrowed down to Powell and Taylor and the prospect of US tax reform which could provide a real source of economic growth in the coming years helped the greenback rally during the week. Moreover, the tax bill is expected to be released as early as November 1 as the House passes a budget resolution which clears the tax reform path and allows the Congress to pass the tax bill without the support of the Democrats.

In the week ahead, the Fed is expected to announce its latest interest rate decision on Wednesday. Over the past week, nearly every economic data released (Q3 GDP, New Home Sales, Durable Goods and Markit PMI) has been better than the expectations which indicate an improvement in the US economy. Hence, the Monetary Policy statement is expected to be hawkish so as to strengthen the view another rate hike is plausible in this year. In addition, the labor market report is scheduled to be released on Friday and the Non-farm payrolls are expected to show an uptick owing to post-hurricane adjustments.

Note: Since the forecasting model for NFP is based on ADP data which is to be released on Wednesday, no prediction for NFP has been made.

Weekly Forex Outlook of USDJPY

 

Forex Outlook:  It was predicted last week that Prime Minister Abe is expected to hold the office after the General Elections, which increases the expectations of BoJ’s current governor Kuroda’s reappointment and extension of the monetary policy extension.  The result of the snap election observed that the Prime Minister won the elections with more than 2/3rd of the majority and became the longest service Prime Minister. This was viewed positively by the market as it meant the continuity of Abenomics and maintaining an ultra-accommodative monetary policy.

 In the week ahead, the key event is the latest interest rate decision from BoJ Tuesday. It is expected that the Bank of Japan will not make any changes in its current monetary policy stance and will leave its interest rates and QE targets unchanged.

Weekly Forex Outlook of USDCAD

Forex Outlook:  It was predicted last week that BoC will leave the interest rates unchanged and was expected to maintain a cautious bias with regards to a further rate hike during this year. There were no surprises from BoC as they maintained the rates at the current level of 1%. In addition, a cautious tone regarding further rate hike was observed as it stated that the there was a slack in the labor market and wage growth levels remained weak.

In the week ahead, Canada is expected to release its GDP figures for the month of August on Tuesday and is expected to see a growth of 0.1% as compared to a growth of 0% last month. Moreover, the employment report is scheduled to be announced from Canada on Friday wherein the unemployment rate is expected to remain unchanged at 6.2% and the employment changes are anticipated to observe a growth of 14.5k versus the previous growth of 10k. However, positive sentiment from USD on the back of expected hawkish comments from the fed is expected to weigh on the pair.

 

Weekly Forex Outlook of GBPUSD

Forex Outlook: It was predicted last week that the GDP is likely to expand by just 0.3% similar to the growth seen in the first half of the year. However, the GDP displayed that the UK economy grew by 0.4% during Q3 which was the strongest since Q4 2016. This raised speculations in the market that BoE will raise the interest rates in the upcoming meeting on November 2. 

In the week ahead, the key event is the latest interest rate decision from BoE on Thursday.It was expected for the BoE to hike the interest rate by 25bps on the back of the hawkish views from the previous BoE meeting minutes which observed that a majority of the MPC members observed “scope for stimulus reduction in the coming months.” BoE Governor Carney on the same day confirmed that he was amongst the majority on the MPC who see the requirement to change stimulus and the odds of a hike have increased.

Weekly Forex Outlook of AUDUSD

Forex Outlook: It was predicted last week that the Q3 headline CPI for Australia is expected to observe an increase on the back of seasonal rise in airfare and gasoline prices. However, the CPI advanced by 0.6% in Q3 but missed the market expectations of 0.8%. This makes it less likely for the RBA to hike the interest rate in the near-term as the inflation falls below the RBA’s target range. In addition, the Australian High Court decision that Deputy PM Joyce was ineligible for parliament seat which meant that the government loses parliament majority added to the weakness in the pair. 

In the week ahead, China is expected to release is Manufacturing and Non-manufacturing PMI on Tuesday wherein the manufacturing PMI is expected to see a small drop to 52.2. In addition, Australia is expected to release its Retail sales data on Friday; the retail sales fell by 0.6% during August and an increase of 0.5% is expected. However, positive sentiment from USD on the back of expected hawkish comments from the fed is expected to weigh on the pair.

Weekly Forex Outlook of USDCHF

Forex Outlook:  It was predicted last week that positive sentiment on growth outlook from the US is anticipated to lead the pair during the week. The same was observed during the week as the US economy expanded at a pace of 3% (annualized rate) which indicates that there is a strong demand from businesses and consumers despite the hit from hurricanes Irma and Harvey.

 In the week ahead, Switzerland is expected to release its Retail Sales data on Thursday which is expected to observe a rise of 0.4% as compared to fall of 0.2% in the previous release. However, the positive sentiment from USD on the back of expected hawkish comments from the fed is expected to lead the pair.

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