FX: 10 Key Events to Watch this Week

Mark your calendars. This week should be another busy one for currencies as economic reports will take a back seat to headline risk. Sino-US relations remain a key focus but we'll be on the lookout for central bank comments. We are scheduled to hear from the heads of the US, UK, Eurozone and Australian central banks - all of them have topics related to the economy or monetary policy.

Here are the 10 key events to watch this week (in order of release)

1. Fed Chair Powell speech on Monday evening at the Atlanta Fed Financial Markets Conference
2. RBA Minutes & Governor Lowe's speech on "The Economic Outlook & Monetary Policy" Monday evening
3. BoE Governor Carney's testimony on the May Inflation Report Tuesday morning
4. New Zealand Retail Sales Tuesday evening
5. ECB President Draghi's Speech on Wednesday
6. Canadian Retail Sales Wednesday
7. FOMC Minutes Wednesday
8. European Parliament Elections Thursday
9. EZ PMIs Thursday
10. UK Retail Sales Friday

Not on this list are the ECB minutes and the UK's CPI reports.   While important, Draghi's comments should be more market moving than the minutes, which will most likely echo his views. The same is possible for CPI as Carney will provide details on their inflation outlook.

EUR/USD, which had been quietly sliding lower is at the greatest risk for a big move.First, investors will be looking to Draghi for clues on the precise terms of the next round of targeted long term refinancing operations and the possibility of more stimulus. Then they'll get an updated assessment of how well or poorly the Eurozone economy is doing with the PMIs and lastly, the outcome of the European elections, which kick off on Thursday and go through the weekend. This is one election, across 28 countries for one European Parliament. By Sunday the results should be in but as of now, it's a tight race with the pro and anti-EU parties neck to neck. The big question is the level of populist support. If they earn meaningful representation, it could stall progress over the next 5 years.  

But populism may not be bad for a currency. Just take a look at Australia. This weekend's victory by Prime Minister Morrison was a big surprise because for months, the polls had shown his coalition poised for a loss. However populism is going strong, not just in the US but other parts of the world. The Australian dollar surged in response and ended the day higher against all of the major countries. While this victory removes none for the country's near term economic risks, investors viewed Morrison's re-election as positive and not negative for the currency. With that in mind though, RBA Governor Lowe could talk rate cuts tonight, which may renew the slide in AUD/USD.

Investors will also be watching Fed Chair Powell's testimony carefully to see if the escalation in trade tensions and sell-off in stocks diminished his upbeat outlook on the economy. After bouncing off 109 last week, USD/JPY is consolidating near 110. If Powell continues to believe that the slowdown is temporary and growth will rebound in the next few months, USD/JPY could break through resistance at 110.50 and make its way towards 112. However if he acknowledges the risks and sounds more cautious, we could see USD/JPY fall back to 109 quickly. As for the other events, we'll discuss them further as the week progresses.