Fewer But Important Economics Might Trigger US Dollar Recovery

With the Federal Reserve failed to provide clear signs of September rate hike, the much anticipated move, disappointment amongst market players drove down the greenback for one more weekly loss against majority of its counterparts. Moreover, weaker than anticipated print of inflation and industrial production numbers, coupled with lower interest rate projections for the coming years, also contributed towards registering consecutive third weekly decline by the US Dollar Index (I.USDX). At the European front, the Greece talks again failed during its last ditched efforts, forcing the EU to call an emergency meeting on Monday; though, the regional currency failed to reflect such pessimism as speculations strengthened that the region wouldn’t allow for Grexit. The GBP was a clear winner as improvements in Inflation and labor market details supported speculations that the BoE may surpass the Fed in hiking interest rates while the JPY remained a bit mixed with the BoJ continue supporting loose monetary policy by mentioning strong economic outlook.

After witnessing headline numbers/events during last week, this week’s economic calendar offers lesser events to fuel the Forex market. However, Flash Manufacturing and Services PMIs from EU, Germany and China, US Durable Goods Orders and final version of Q1 2015 GDP and German CPI are some of the important details that could provide considerable Forex moves during the current week. It should be noted that the UK economic calendar is empty during the current week. Let’s discuss them in detail.

US GDP, Durable Goods Orders and Housing market Numbers To Determine USD Moves

Even if the Federal Reserve failed to comment on September rate hike, Fed Chair remained static on its first fed rate hike during 2015 should the economic indicators continue improve. Hence, a positive GDP reading on Wednesday, coupled with the strong Durable Goods numbers on Tuesday, could again strengthen the expectations for the Fed’s near-term interest rate hike, in-turn rejuvenating the US Dollar rally. Moreover, the housing market numbers have been printing better numbers off-late and could become an added support for the USD during its releases on early week days.

 

With the US growth numbers all set to register its first quarterly decline in four to -0.2% number, the Federal Reserve might become cautious before signaling their first interest rate hike since 2006. However, such interruptions into the outcome was well orchestrated with the weather effects and should the actual GDP reading either matches the -0.2% or remains below its intermediate forecast of -0.7%, the USD can witness lesser negative effects. Also, a surprise reading into the positive region could fuel the greenback towards reversing some of its early month losses.

Moreover, the monthly reading of Durable Goods Orders m/m, scheduled for Tuesday, also supports the expectations of a strong USD as the figure is likely to register -0.6% mark against previously reported -1.0% while the Core reading is expected to reverse previous decline of -0.2% with the 0.6% growth in orders. Housing market details, namely Monday’s Existing Home Sales and Tuesday’s New Home Sales, are also in the cadre of expected US positives as the Existing Home Sales is likely to rise to 5.27M against its prior reading of 5.04M while the New Home Sales is expected to rally to 524K comparing its previous number of 517K.

In addition to the headline numbers, the monthly Personal Income-Spending details, scheduled for Thursday release, together with the weekly Jobless Claims, are showing mixed signs as details relating to income and spending are a bit more US positive while the Jobless Claims may pullback some of the greenback gains if meets the forecast signaling higher numbers.

Even if the cautious view of the Federal Reserve, coupled with downgraded forecasts, pulled back some of the greenback gains, a positive GDP reading could wipe the market pessimism and may help the US Dollar regain its strength. However, Greece talks could become an important indicator to determine the countermoves of the USD, as a successful deal will continue hurting the greenback.

Important Manufacturing and Services PMIs

Chinese HSBC Flash Manufacturing PMI, scheduled for Tuesday, opens the round of Flash readings of Manufacturing and Services PMIs from Europe, Germany and the US during the rest of the week. Even if the number is expected to register its consecutive fourth reading below 50 level, it is a bit higher, 49.4, than its upwardly revised previous reading of 49.2, and an actual number meeting the forecast can provide a relief to commodity currencies, namely AUD, NZD and CAD. Moreover, an actual reading above 50 level can become considerably better for these currencies, mainly the AUD.

German & EU Flash Manufacturing & Services PMIs, scheduled for Tuesday as well, are a bit mixed as the German Manufacturing PMIs is likely to continue its up-move, to 51.5 from 51.0, while the EU reading can weaken a bit to 52.0 from downwardly revised figure of 52.2.

US Flash Manufacturing PMI, scheduled for Tuesday, becomes another Manufacturing PMI to take care off. The figure is expected to test 54.2 mark as compared to its 54.0 upward revision of prior release and can become an added advantage, coupled with other scheduled events,  for the USD to move up.

Germany and Greece Talks To Become EUR Signals

Other than the Manufacturing and Services PMIs, the German details, namely, Ifo Business Climate, on Wednesday, and the GfK German Consumer Climate, on Thursday, are important details to determine near-term EUR moves. With both the details unlikely to register considerable changes, the EUR moves are less expected to be affected by the outcomes except the actual figure marks excessive changes. 

Having witnessed the another failure to reach the deal during talks between the Greece and its International creditors, the EU forced to have an emergency meeting on Monday that could determine the fate of Greece in Euro region. During its weekend telecom discussions between the German, French, Greek and the EU leaders, all of them seemed quite optimistic that the deal would be reached during the current week, saving the Greece from Euro exit. Moreover, the troubled nation also managed to present an acceptable proposal during its early Monday proceedings of the meeting, supporting the chances of getting the emergency funds. With the Greece now talking the tune of its international creditors, it is much likely that the Grexit can be avoided, providing considerable up-move to the EUR. However, history of the Greece discussion has always signal failed deal and given the such instance happen during its current final meeting, the Greece default, Grexit in-turn, can’t be avoided, providing noticeable EUR weakness.

New Zealand Trade Balance and Japanese Details

After witnessing majority of details during early week days, the New-Zealand Trade Balance, scheduled for Thursday, and the Japanese Details relating to CPI and Unemployment Rate, scheduled to be released on Friday, are some other details that could help determine the respective moves of NZD and JPY.

Having witnessed a recent decline in New-Zealand GDP, a negative Trade Balance, expected to test -50M against previously reported 123M, can provide additional drag to the NZD while the Japanese CPI numbers are likely to print softer than prior announcements and could continue supporting the BoJ’s lose monetary policy, in-turn supporting the JPY weakness. Moreover, the Japanese Unemployment Rate is expected to remained stagnant at 3.3% while the expected hike in Household Spending, to 3.5% from -1.3%, may help the JPY to strengthen against majority of its counterparts.

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