FXstreet.com (Barcelona) - Amidst weaker payrolls and disappointing prints
on the ISM and the NFIB small business survey, it’s hard to make a case for upside risks around next week’s data. NY Empire (Mon) and Philly (Thurs) should consolidate at weak levels. Chain store sales warn of downside risks to retail sales (Mon). Outside of the data, the main event risk will be Bernanke’s semi-annual testimony scheduled for midweek. “Despite the recent mixed bag of economic data and indicators, the USD index uptrend remains in good shape. A strong close above key 83.60 (June 1 highs) would add to upside enthusiasm for another decent leg higher.” writes the Strategy Team at Westpac.
Bernanke’s testimony the key focus next week and he is sure to have an unambiguously dovish tilt and expectations into the testimony will likely check USD upside. “However, we suspect Bernanke will ultimately disappoint by withholding a clear signal that QE3 is imminent and will repeat that more accommodation remains dependent on another leg down in the economy.” they add.
QE2 and Operation twist 1.0 both saw a more sustained period of economic weakness than we have not seen so far and the Fed may prefer to wait until their Sep 13 (rather than Aug 1) meeting when Bernanke is scheduled to deliver a press conference along with a new set of economic projections.