Dollar Looks to Recover From Mortgage Market Worries, Record Oil Prices
This week the US Dollar will look to recover from losses sustained on Friday due to mortgage market worries and new record high oil prices.
The Dollar was sold off because of concerns that losses at Fannie Mae and Freddie Mac may spiral out of control and see the lenders nationalized. The big winner from the news was the Australian Dollar, hitting fresh 25-year highs against the Greenback.
Oil was driven higher (above $147 a barrel) on speculation that Israel may attack Iran. This helped the Canadian Dollar recover from much worse than expected employment data. The Canadian Labor market shed 5K jobs in June while it was expected to create 10K. This contributed to an increase in the Unemployment Rate from 6.1% to 6.2%.
This week we have a jam packed economic calendar with high volatility events right from the off. We begin the week on Sunday night with Core Retail Sales and Retail Sales from New Zealand. The Core number is expected to increase by 0.5% MoM while Retail Sales are expected to moderate by 0.1% on a monthly basis.
Monday: On Monday morning the main focus will be UK PPI Input MoM. The monthly rate is expected to come in at 2.5%, less than last month's 3.8%. However, this will still see the YoY number climb to 28.9%.
The rest of the London and New York sessions will be fairly quiet with Industrial Production from the Eurozone and the Fed Governors open meeting and vote on mortgage rule changes.
At 23:45 Monday night we will see further high impact data from New Zealand. This time it is the CPI QoQ. Growth in the Consumer Price Index is expected to climb to 1.4% QoQ.
Tuesday: Tuesday promises to be a busy day with high volatility events from the UK, Australia, Japan, Eurozone, US and Canada. We begin the day at 00:01 with the UK's RICS House Price Balance. This survey measures the percentage of chartered surveyors reporting a reduction in house prices in their area. The market is anticipating that 93.8% of respondents will register a price drop. At 09:30 we will see the UK CPI with the YoY rate expected to climb to 3.6% pushing the data further above the BOE's 2.0% threshold. Not surprisingly Core CPI is expected to remain at 1.5% indicating that food and energy costs remain the main driving factors of consumer inflation.
At 02:30 the RBA will release the minutes from their last Interest Rate Meeting. Traders will be interested to see the RBA's views on slowing economic growth and the chances of any more interest rate hikes in the near future. The Australian Dollar has been trading at or near 25-year highs against the US Dollar for some time now in the face of strong commodity prices and a favourable interest rate gap.
Japanese Yen traders will be focussed on the Interest Rate Announcement and the accompanying BOJ Press Conference. With interest rates expected to remain steady at 0.50% more focus will fall on the press conference. Traders will be keen to see if the BOJ expects economic growth to remain relatively flat. It is expected that interest rates will remain at 0.50% for the foreseeable future.
Although the Euro is likely to react more to data from the US than its own economic data there is one high volatility release due. The German ZEW Economic Sentiment will probably fall again to -55.5.
It will be a busy day in the US with Core Retail Sales, Retail Sales and PPI at 13:30 followed by Bernanke's Testimony to the Senate Committee on Banking, Housing and Urban Affairs at 15:00. Retail Sales are expected to moderate slightly from May's impressive growth with the Core figure expected at 0.9% and Retail Sales at 0.4%. Elsewhere PPI is expected at 1.3% MoM, down from the 1.4% growth in May.
Canada will join Japan in making its latest Interest Rate Statement. Rates are expected to remain on hold at 3.00% but with the BOC's bias towards cutting rates traders will be on the lookout for any surprise cuts. The rate statement will also be closely scrutinised for changes in the language that may indicate rate moves in the months to come.
Further high volatility events for the week are as follows:
Wednesday:
04:05 RBA Governor Stevens Speaks
09:30 UK Claimant Count Change
10:00 Eurozone CPI YoY
13:30 US Core CPI MoM
14:00 TIC Net Long-Term Transactions
15:00 Bernanke Testifies before the House Committee on Financial Services
19:00 FOMC Meeting Minutes
Thursday:
BOC Monetary Policy Report
BOC Governor Carney Speaks
Visual Analysis and Historical Data
This week the visual analysis and historical data tool will support the US PPI and US Core CPI data releases.
Tags: Australian Dollar, BOC Interest Rate Statement, BOC Monetary Policy Report, boj interest rate announcement, Canadian Dollar, Claimant Count Change, core cpi, core retail sales, cpi, fomc meeting minutes, Industrial Production, PPI, ppi input, rba meeting minutes, retail sales, rics house price balance, TIC Net Long-Term Transactions, unemployment rate, US Dollar, ZEW Economic Sentiment