Is the USA building?

US construction technique

Building Permits (Tuesday 18th 1.30pm GMT) is a key leading indicator of economic growth. This early data reveals the annualised number of residential building permits issued last month and give a great insight into the wider fiscal picture.

While geopolitics may be a little ramped up, it is still domestic consumption that drives the US economy. If they’re building, the picture looks brighter. Forecasts suggest an increase from last month’s 1.22M to 1.25M permits reflecting a generally positive state of affairs for the USD.

Bank bosses tell it like it is

like a boss

Kicking off the big events of the trading week, the Bank of Japan’s boss Kuroda is speaking at the 92nd Convention of the Trust Companies Association of Japan on Monday 17th at 7.15am GMT. This is the man shaping the direction of the interest rate in one of the world’s key currencies – JPY and traders want to know where it can go from here.

On the other side of the world and at the other end of the week, the Bank of England’s Carney is speaking not once but twice in Washington. First up at 4.30pm GMT on Thursday 20th, he addresses the Institute of International Finance Policy Summit then hops over to join in a panel discussion at a Bank of France event at 5.30pm GMT. With so much volatility surrounding GBP, traders will be closely analysing what he says looking for clues to possible interest rate changes.

 

China’s GDP is just a small part of the picture

Looking like good friends

Monday 17th at 3am GMT sees China’s National Bureau of Statistics reveal the latest GDP figures. Experts predict growth will remain consist with last month at 6.8%, where its hovered since the start of 2016.

Recent talks between Premier Xi Jinping and President Trump have hinted at improvements in trade relations. But China has made many of these promises before, few of which have been followed through so businesses remain wary. It’s worth noting China needs help with energy, so commodities like oil, coal and gas could see an uptick. Additionally, encouraging international investment in financial instruments would help their markets become more stable and professional. Both areas could see a real improvement as a result of the 100-day plan announced a week ago and therefore a knock-on effect in the value of the Chinese yuan.

Keep an eye on political developments in the region with Trump strongly hinting that business advantages could be had for cooperation in taming North Korea.

Which country does this eagle seem like?

At the same time as GDP we get an insight into the yearly change in Chinese Industrial Production. Growth is predicted to drop from 6.3% to 6.2%. As there is a strong correlation between AUD and CNY look out for the release of the Reserve Bank of Australia’s Monetary Policy Meeting Minutes at 2.30am GMT on Tuesday 18th. With the economy a little less stable than those in power would like, the Australian dollar may well react to the CNY events too.

Is the US facing stagflation?

It all looks the same

This week sees the release of a number of key data releases for the American currency and predictions are conservative at best.

Thursday 13th 1.30pm GMT – Producers Price Index
Last month’s dribble of growth has slowed and analysts predict 0.00% change in the index.

Friday 14th 1.30pm GMT – Consumer Price Index (CPI) and Core CPI
In a potentially worrying development, CPI also looks set for a reduction to 0.00% growth this month and Core CPI stays the same at 0.2%.

Friday 14th 1.30pm GMT – Retail Sales and Core Retail Sales
If predictions are correct, the Trump effect appears to be flagging as both sets of data are also forecast to stay the same at 0.1% and 0.2% respectively.

When the political world is facing a global upheaval and economic data looks staid, where are traders going to head to get their returns? Keep an eye on commodities this week. There could be some interesting action.

Never a quiet dollar day

via GIPHY

This week is ram-packed for USD and there is a lot of uncertainty in a lot of directions, which means FUN. Two key trading events stand out from the rest.

Monday 9.10pm GMT Federal Reserve Bank Chair Yellen speaks. Everyone wants to know when the next rate rise is going to arrive so traders will pay close attention.

Thursday 3pm GMT UoM Preliminary Consumer Sentiment index data is released. Last month’s figures were revised down to 96.9, which meant confidence had dropped. This month analysts expect a minimal rise to 97.1 but Trump’s failure to pass his healthcare reforms, combined with events in Syria could mean another drop. But the positive meeting with China’s Premier Xi Jinping could counter all that. There is certainly lots of room for manoeuvre.

 

Aussie job data – will it be positive?

wobbly – GIPHY

Employment Change on Thursday 13th at 2.30am GMT could be the positive news AUD traders are looking for. Pundits expect an upswing from -6.4K to 20.3K and if they’re right this is good news for the economy. People in work have money to spend and keep the cogs of the retail sector turning.

With no change expected in the Unemployment Rate (5.9%) the impact may not be huge. But the geopolitical tremors around the world could keep investors cautious. AUD isn’t a safe currency and tends to be bucked around when there is uncertainty. Recent events in Syria, the first round of the French elections and instability in the Korean peninsula could all mean traders decide to go elsewhere and this could keep the currency suppressed.

100 days for a bright CNY future

too bright

Donald Trump and Xi Jinping seem to have got on reasonably well if the FTs Sunday news article is to be believed. Instead of the trade war that could have been on the cards, a 100-day plan has been set in motion delivering intensive trade talks with a view to benefit both nations.

Behind the scenes deals are being made to improve access to financial markets inside China and rescind the ban on US beef while the investment ceiling in the Bilateral Investment treaty will be raised. With a predicted upswing in the CNY Trade Balance from -60B to 76B on Thursday (time to be announced) and the recent positive oil supply moves, CNY is starting to appeal to more traders.

Which way will oil go this week?

Who knows?

Your guess is as good as anyone’s this week. In the last hour alone major oil news headlines have completely contradicted each other. Take a look at what CNBC, MarketWatch and Bloomberg have to say about the effect of the problems in Libya today.

A snapshot of oil headlines 03/04/17

So while Crude Oil Inventories were slashed to 0.9M last week that is no indication of where they will go this week. As far as the markets go, oil seems to be the closest commodity to roulette; almost a complete gamble.

To play this market, what smart players need to factor in is the effect of China deciding to buy more from the Americas, the on-going OPEC agreement, and the Ukrainian situation, which affects Russian supply. Do your homework and you could have a reasonable chance of predicting the markets reaction to a change in Crude Oil Inventories on Wednesday. Some analysts are predicting a sharp increase back towards the 5M seen a couple of weeks ago, not many see a further drop. Whatever happens, it will be fun.

What’s the USD news this week?

some serious fun going on

Aside from the ISM Manufacturing PMI on Monday, most USD action takes place from Wednesday onwards this week mainly kicking off with the release of the FOMC Meeting Minutes.

Usually traders are gagging to get their mitts on the in-depth reasonings of the FOMC, especially when they have changed things up as they did last month with the rate rise. But so many FOMC members have been speaking lately and only one dissenting voice (Kashkari) has been heard, it feels to many like we already know what it’s going to say. So there is a chance the markets won’t react much to the release at 7pm GMT.

Wednesday 5th also delivers the ADP Non-Farm Employment Change and the ISM Non-Manufacturing PMI at around 1.15pm and 3pm GMT respectively. A significant drop is expected from the current 298k increase in employment to 191k. It’s still an increase but it’s dramatically lower than last month. Additionally, it could give some insight into the all-important Non-Farm Employment Change on Friday at 1.30pm GMT.

Remember Wednesday’s announcement is computer guesswork based on analysis of payroll data, while Friday’s is the real deal government figures.

Friday’s Non-Farm is expected to fall as well, but even further, going from 238k to 176k. The increase in Average Hourly Earnings released at the same time isn’t expected to show a change with a steady 0.2% increase on the cards. And the Unemployment Rate is also expected to remain the same at 4.7%. This is despite Thursday’s  new Unemployment Claims figures predicted to show a small drop from 258k to 251k.

But behind everything is the USA-China Summit running across Thursday and Friday. Trump’s tweets and photo ops could send everything off course.

It’s a rocky road ahead for EUR and GBP

The next two years look decidedly rocky for both the Euro and Sterling as Brexit revelations send shockwaves through markets already battle-weary from the shocks of 2016. The future for the pound especially seems slippery at best.

Adding fuel to the fire, one headline in the British press today reads “EU financial centres vie to poach tens of thousands of City jobs.” Yesterday, Lloyds of London announced it was setting up ‘a subsidiary branch’ in Brussels. I would imagine that subsidiary will mimic many of the HQ activities within the next two years. For those in the City of London, it’s like seeing the battle star being built while watching from the planet Alderaan.

Many financial institutions are creating new branches inside the EU to ensure their operations are not disrupted when the UK exits the single market. It’s not hard to see those operations poised to take over when Brexit seals the U.K.’s fate and slams the financial market door in their face. European cities like Paris, Frankfurt and even Dublin would welcome the economic benefits currently enjoyed by London as host to the financial centre of Europe. The question is which one will win.

EURUSD FX pair
The EURUSD is back under pressure again. At support

News like this is likely to only add to the weight of the pound as it sinks further against the dollar and other major currencies.