Busy week next one for dollar bulls

The gruesome of market moving data is already behind for the month, leaving a bitter taste to dollar shorts: the greenback had a pretty nice come back after sort of disappointing payrolls reading the previous week that suggested some downward pressure in the American currency.

But once again, Europe offered no positive macro data, and when it comes to the ECB, the most outstanding note was Draghi pointing to the imbalance in between the ECB and the BOE and the FED, something largely discussed in these weekly reports, exposing his interest on a weaker EUR. 

If something, USD limited upward potential is a result of weak US yields, with the 10Y note ones stuck around the bottom of its latest range around 2.40%. As long as yields remain low, the greenback won’t be able to firm up steadied. Another factor weighing on dollar strength is risk aversion: the geopolitical woes escalate daily basis, with investors preferring commodities and yens above the dollar. 

Anyway and for the upcoming week, dollar strength or weakness will depend on other economies’ data as there won’t be mayor US fundamental releases until Friday. 

Starting with Asia, Chinese, Australian and New Zealand releases will take center stage until Wednesday. Commodity currencies had been on the negative side on poor data, so if numbers continue to disappoint, it should be an easy follow through for the greenback against them. 

In Europe, German ZEW survey on Tuesday is expected to fall again, along with the country CPI to be released on Wednesday. Both readings had been EUR negative when down over the past months and if they miss expectations, will reinforce the bearish case of the common currency. But most in important numbers will come Thursday, with EU inflation and GDP: inflation stands at record lows of 0.4% and a drop below that reading will be a strong set back in the EUR, considering it will increase deflationary pressures. As for the GDP reading, is also expected to shrink yearly basis, adding to EUR weakness. If however, we have one up, and one down, we can then have not many definitions after the dust settles following the releases. German GDP released also on Thursday, will likely be over shallow by Euro area data, unless it comes along with it, either positive or negative.

In the UK inflation readings report and Carney speech will follow monthly unemployment figures, both on Wednesday. That means the result of employment data may be initially limited no matter how much it diverges from expectations, ahead of BOE’s governor speech. His bold comments for a couple months ago on a sooner than expected rate hike had been tempered with a more dovish stance ever since, but market players are still waiting for Mr. Carney to provide a more clear date on such rate hike. If inflation report and upcoming statement suggest the BOE will made a move late this year, or early next one, Pound should become much more attractive than lately, advancing strongly against USD, and commodity currencies in particularly, and probably less against the JPY. On Friday, UK GDP will also be relevant for Pound destiny, as a solid number will back up latest economic growth: a reading above expected will also be seen as bullish for the local currency.

The week will close with US PPI, TICS, Industrial Production and Michigan consumer sentiment all together between 13:00 and 14:00 GMT. Except for PPI, the rest of the data is expected to tick higher, and therefore support greenback on the idea the FED will also will consider rising rates sooner than later.