Week Ahead: Trading Outlook

Key Events This Week: November 17th – November 20th

Sun: CNY – New Yuan Loans, JPY – GDP
Tue: GBP – CPI, EUR – EZ ZEW Survey, USD – CPI
Wed: USD – FOMC Minutes Release Oct 27th/28th
Fri: CAD – CPI

Overview

USD USD longs have been increasing over recent weeks taking them back up to high levels last seen around August. Speculation over a December rate hike continues to grow leaving USD open to a squeeze in positioning on any disappointment from the upcoming FOMC minutes release. Retail sales on Friday came in at 0.1%, below expectations of 0.3% however Michigan consumer confidence came in above expectations to print 93.1 vs 91.5 expected. Attention this week will be on the minutes release from the Octobr FOMC meeting where the Fed signalled that a December lift-off is very much a possibility.

EUR The single currency was able to stem the losses of recent weeks, remaining range bound at lows last week as the US Dollar paused in its ascent. Comments from Mario Draghi confirmed the weakening of inflation dynamics and the need for the ECB to reassess its monetary policy at their December meeting.

GBP Sterling was able to sustain a rebound last week, retracing some of its recent losses, as the latest unemployment data showed yet a further decline with the rate falling to 5.3%, moving deeper into territory not seen since 2008. Average weekly earnings however grew less than expected, stalling at 3%. Focus this week will be on domestic CPI this week following the recent negative print last month which was followed by a very Dovish Bank Of England meeting.

JPY The Japanese Yen was able to regain some of its recent losses this week, benefiting from a softer US Dollar. BOJ board member Harada commented this week that the BOJ doesn’t need to ease currently as the effects on the Japanese economy from low oil prices will eventually dissipate. Focus will be on domestic GDP this week as traders look to see just how affected the Japanese economy has been by the slow-down in China.

AUD Despite softer commodity prices, seen in reaction to yet more data weakness out of China, the Australian Dollar was boosted as the latest employment data showed Australian unemployment to have unexpectedly contracted in October, printing 5.9% against 6.2% expected. Australian unemployment has been steadily decreasing from its summer highs, an encouraging sign for those who feel the RBA will refrain from further easing this year.The Aussie’s trading outlook this week will be driven Chinese data and the US FOMC minutes release.

CAD The Canadian Dollar was lead lower last week following the latest monthly report from OPEC which noted that Saudi Arabia, the world’s largest exporter of oil, had increased supply by 50k barrels in October. Oil extended losses from last week making its way back under the $42.54 October lows back to $40 per barrel.