Last week was characterised by a rapid appreciation in the value of the US Dollar. However, this wasn’t due to improving economic conditions in the US as much as confirmation of deterioration in other countries. The dollar also took strength from falling commodity prices.

The currencies worst hit against the Greenback were the UK Pound, Euro, Canadian Dollar and Australian Dollar. The GBPUSD made a new 21-month low, the EURUSD has its sharpest fall in 3 years, the AUDUSD extended its longest loosing streak since 1980 and the CADUSD had its biggest weekly rally since 1971.

The UK, Eurozone and Australia all kept interest rates on hold last week. Australia sighted economic slowdown in a statement that left the way open for a rate cut at the RBA’s next meeting while the Eurozone conceded that there was no monetary policy bias, thus killing any hopes of further rate hikes from the ECB.

The Canadian Dollar suffered from a poor labor report. Employment Change came in at -55K as opposed to the +5K expected.

The coming week is very busy with a host of high volatility events expected once again. We begin on Monday morning with the RBA Monetary Policy Statement. Traders will be looking at this to confirm the chance of a rate cut at the next interest rate meeting. We also have UK PPI Input at 09:30 with expectations of 1.0% MoM growth for July. Heading into the US trading session we have Canadian Housing Starts at 13:15. Last week we saw Canadian Building Permits fall by more than expected at -5.3% MoM with Housing Starts also expected to fall slightly from 218K in June to 210K for July.

Tuesday will bring the latest round of inflation data from the UK with the Consumer Price Index (CPI) YoY watched very closely. Economists are expecting the YoY figure to rise to 4.1%. Later on Tuesday we will see high volatility for the US and Canadian Trade Balance releases. US Trade Deficit is expected to widen from 59.8B to 61.8B while Canadian Trade Surplus should increase slightly to 5.7B from 5.5B.

We continue on Wednesday with the Japanese preliminary GDP. This is a quarterly calculation with GDP expected to show contraction of 0.6% from growth of 1.0% in the previous quarter. UK Claimant Count Change is also due with an extra 17.5K expected to have claimed unemployment benefit in July. There is an economic report from the BOE due at 10:30. The BOE Inflation Report follows yesterday’s CPI news. The next round of high volatility data from the US comes at 13:30 with Core Retail Sales and Retail Sales hitting the wire. The Core number is expected to show 0.5% growth MoM while the raw number will probably be flat at 0.0% MoM.

Thursday will be typically busy with high volatility from the Eurozone, US, Canada and New Zealand. First up is German Preliminary GDP QoQ. GDP is expected to have contracted by 0.8% after 1.5% growth in the previous quarter. Trichet spoke last week of a “technical correction” in GDP and this would be the first evidence of that. At 10:00 Eurozone CPI YoY is due with a number of 4.1% widely expected. Next is US Core CPI MoM. A reading of 0.2% is expected after 0.3% growth in June. The Bank of Canada will add to the excitement on Thursday with its Summer Quarterly Review. Traders will be particularly interested to see how the BOC explains Canada’s economic performance over recent months. Data from New Zealand will be of high importance with Core Retail Sales and Retail Sales due. Both numbers are expected to post a MoM decline with -0.8% and -1.6% anticipated respectively.

Friday will round off the week with two more high volatility events. First is the latest round of Treasury International Capital (TIC) Net Long-Term Transactions data. It is expected that 55.0B of foreign investment came into the US long-term securities market last month from 67.0B the month before. Also due is the preliminary University of Michigan Consumer Sentiment with a number of 62.0 expected.

Visual Analysis and Historical Data

In the up coming week the visual analysis and historical data tool will support the US Core CPI release.

This week promises to be a very busy one with no less than four central banks due to release interest rate decisions. For what it’s worth, all four banks are expected to remain on hold but traders do see a small chance that the RBA may cut rates now ahead of the more widely expected cut in September.

We begin the week with a high volatility event from New Zealand on Sunday night. Unit Labour Costs are expected to show a 0.8% increase QoQ.

On Tuesday morning we have the first of our scheduled interest rate statements, which comes from the RBA. Rates currently stand at 7.25% and the majority of economists expect the RBA to stay on hold however some are not as convinced. A string of recent weak economic data from Australia has caused the market to price in a quarter percent drop by the end of the year at least. At this point it would seem likely that the RBA will use the statement to put forward the case for an interest rate cut, essentially preparing the market for the following month.

Tuesday morning’s London session will be busy with three high volatility events due from the UK. First of all the Halifax House Price Index is expected to show a monthly decrease of 1.5% in the cost of UK homes. This economic release date is tentative and could fall at any time over the next week. At 09:30 Manufacturing Production MoM and Services PMI will be released. The UK manufacturing sector is expected to respond modestly to a 0.5% decrease in value of manufacturing output in June with a 0.1% increase in July. Services PMI is expected to drop to 46.7 from 47.1, a number which still shows contraction in the Services industry.

Also on Tuesday we have the ISM Non-Manufacturing Composite. The number is due to show contraction with 48.6 expected. Later on in the NY session is the FOMC Interest Rate Statement. Rates currently stand at 2.00% with no move expected. High volatility is likely with traders still anticipating a rate hike if anything.

Following on from the RBA Interest Rate Statement the previous day we will see Australian Home Loans early Wednesday morning. The number is expected to drop by 2.1% MoM after a 7.9% fall in June. Also due on Wednesday at 15:00 is the Canadian Ivey PMI. This is a broad economic indicator because it surveys all sectors of the economy. The indicator is expected to come in at 62.0 after a 69.6 June reading. Rounding up Wednesday we have high volatility news from New Zealand. Employment Change and Unemployment Rate will be released with 0.1% and 3.8% expected respectively.

On Thursday we will have the last two interest rate announcements but prior to this we will see employment data from Australia. Employment Change and Unemployment Rate are both due with the Australian economy expected to have added 4K jobs in July. Despite this increase in jobs, unemployment is expected to have increased to 4.3%. At midday we have the BOE Interest Rate Statement. Rates are expected to remain on hold at 5.00%. Traders will be interested in the wording of the statement with the BOE expected to sight rising inflation and a flagging economy in their decision the keep rates where they are.

At 12:45 the ECB Interest Rate Announcement is due. The rate is expected to remain on hold in the face of high inflation (the CPI Flash Estimate released last week showed a 4.1% annual rate). However, economists are becoming increasingly sceptical of the Eurozone’s economic strength. A large amount of attention will be paid to the ECB press conference that follows the rate announcement. Traders will be looking for clue to future moves with Trichet expected to maintain that inflation will come under control towards the end of the year. Spain’s Solbes has commented in recent days that he expects to see 4% inflation by the end of the year, pending oil price stabilisation.

The afternoon session will see high volatility construction events from Canada and the US. At 13:30 (the same time as the ECB Press Conference) Canada will release its Building Permits figures. The number is expected to fall by 1.0% MoM. At 15:00 we will see US Pending Home Sales. It is believed that this number is more forward looking than Existing Home Sales and high volatility can be expected. A drop of 1.0% is expected following a MoM decrease of 4.7% in the previous month.

Rounding up the week on Friday we have a quieter day in store. There are two high volatility events due from Canada, both of which showcasing Canadian employment health. Employment Change is expected to follow a decline of 5.0% in June with an increase of the same number for July while the Unemployment Rate should hold firm at 6.2%.

Last week was extremely busy in terms of economic news. The first half of the week was dominated by the Euro and Aussie Dollar, which made new record highs and fresh 25-year highs against the USD respectively. However, the Greenback was rescued by an 11% weekly decline in the price of oil. This is the largest weekly fall in three years and may form a significant top. Although the Euro and Aussie have retreated from their highs the US Dollar negative trend continues.

This week will be quieter on the news front with US housing market data seen as the main focus. Last week saw an unexpected increase in Building Permits from 978K (revised) to 1091K and Housing Starts from 977K (revised) to 1066K. If traders believe that the trend will be carried forward into this week then they will be hedging their bets for better than expected Existing Home Sales and New Home Sales. Existing Home Sales are due on Thursday July 24th at 15:00 and are expected to fall from 4.99M to 4.93M. New Home Sales will be released on Friday July 25th at 15:00 and a decline from 512K to 508K is expected.

Apart from housing data it promises to be a very quiet week for the US in terms of high volatility events. The only other big news scheduled is Core Durable Goods Orders. Also due for release on Friday, the market is expecting -0.2% for June versus -0.9% in May.

Elsewhere the UK has the busiest week in store. The first high volatility event is due on Tuesday at 09:45 when BOE Governor King and Deputy Governor Gieve testify before the UK Treasury Committee. This will be followed on Wednesday July 23rd at 09:30 by the BOE MPC Meeting Minutes. The vote breakdown is expected to show an 8-1 split in favour of a hold at 5.00% with Blanchflower calling for a cut once again. On Thursday 24th at 09:30 UK Retail Sales for June will hit the wire. There was an unexpected gain of 3.5% in May and the consensus estimate is for this to be offset by a 2.5% decline in June. Before the week is up we will see UK GDP QoQ. The previous quarter's data has already been revised lower to 0.3% from 0.4% and the preliminary release for the most current data is expected to show 0.2%. It will be interesting to see if the BOE can fight inflation (CPI YoY stands at 3.8%) with interest rate hikes in the face of slowing economic growth.

Data from Canada also promises to be plentiful for the week ahead. On Tuesday at 13:30 we will see Core Retail Sales which are expected to show a 0.8% growth for June, down from the 1.1% seen in May. Wednesday will bring us Canadian Core CPI for the month of June. Analysts are expecting 0.2% growth, down slightly from the 0.3% seen in May.

Other high volatility events for the coming week are as follows:

Monday 21st:
02:30 - Australian PPI QoQ

Wednesday 23rd:
02:30 - Australian CPI QoQ
22:00 - RBNZ Interest Rate Statement

Thursday 24th:
09:00 - German Ifo Business Climate Index

Visual Analysis & Historical Data
This week the visual analysis and historical data tool will support the following data releases:

BOE MPC Meeting Minutes
Canadian Core CPI MoM
US Existing Home Sales
US New Home Sales

This week the market awaits commentary from Fed speakers, including Bernanke, regarding future monetary policy. Economists are interested to see whether the Fed sees inflation as more of a risk than a weak economy ahead of future interest rate meetings. The question remains: can the US economy survive an inflation fighting rate hike without falling into recession.

This comes on the back of comments last week from the ECB. The Eurozone increased interest rates to 4.25% last Thursday but stated that they don’t expect any future need for further hikes. This resulted in ‘buy on rumour sell on fact’ trading in the EURUSD. Post data the currency pair fell from 1.5908 to a Thursday low of 1.5681.

Early focus in the new week will be on the reaction from US traders following the dismal US Labor market data. Non-Farm Employment Change was in negative territory once again (-62K), Unemployment Rate remained at 5.5% and Initial Jobless Claims climbed above 400K for the second time this year. US markets were closed on Friday for the Independence Day Holiday so it will be interesting to see how traders digest the news after the long weekend.

Monday, Tuesday and Wednesday this week will see a 3-day G8 meeting in Hokkaido, Japan. The meeting is expected to be dominated by climate change, food and commodity prices. There have been pre-meeting comments from Japan and the US blaming a weak US Dollar for inflated energy prices. Traders are waiting to see if G8 members’ comments are strong enough to support a dollar rally on speculation of central bank intervention.

In other news this week, high volatility economic data from the US takes a bit of a breather. The main events will be Fed Chairman Bernanke speech at 13:00 on Tuesday and his testimony before the House of Representatives Committee on Financial Services on Thursday at 15:00. Traders will be looking for hints as to the Fed’s concern over inflation.

The US is also due Pending Home Sales at 15:00 on Tuesday, Initial Jobless Claims at 13:30 on Thursday (more volatility than usual is expected due to the +400K reading last week) and the Trade Balance and Preliminary Michigan Sentiment at 13:30 and 14:55 respectively. The only data that is expected to show any improvement is Initial Jobless Claims where a slight moderation to 397K is expected.

Elsewhere the Canadian economy steels the spotlight with no fewer than five high volatility releases due. Monday will see Building Permits (13:30) and the BOC Business Outlook Survey (15:00). Following this we will see Employment Change and Unemployment Rate at 12:00 and the Canadian Trade Balance at 13:30 on Friday.

Additional high volatility events this week are as follows (all times are UK DST):

Monday
UK Industrial Production (09:30)
NZIER Business Confidence (23:00)

Tuesday
Halifax House Price Index (NTS)

Wednesday
Australian Home Loans (02:30)

Thursday
Australian Employment Change (02:30)
Australian Unemployment Rate (02:30)
BOE Interest Rate Statement (12:00)

The US Dollar ended last week broadly lower against the majors on worse than expected economic data and reduced speculation of a Fed Interest rate hike. In fact the greenback traded lower against the Japanese Yen, Swiss Franc, Euro, GB Pound, Canadian Dollar and the Australian Dollar, as it was unable to hold on to all of the prior week’s strength.

On the data front the USD was not helped by Housing Starts falling to a 17 year low or the fact that the Empire State Business Conditions Index, Building Permits, Philly Fed Index, Industrial Production, Capacity Utilization, Current Account and Initial Jobless Claims all pointed towards economic slowdown.

 

Interest rate futures are now showing just an 8% chance that the FOMC will increase rates this month. As you would expect the FOMC Interest Rate Statement on Wednesday is the major focus for the week. Particular attention will be paid to the Fed’s views on inflation risk and economic slowdown. Remember that the Fed’s traditional tool for dealing with inflation is a rate hike. However, increased interest rates may put too much pressure on an already weakening economy.

 

The Federal Reserve Open Market Committee is expected to leave the Federal Funds Rate unchanged at 2.00% this week.

 

Aside from the interest rate announcement we have high volatility housing data from the US this week. On Wednesday, New Home Sales are expected to contract once more to 515K. This will be followed by Existing Home Sales data on Thursday that is expected to post an increase to 4.96M annualized.

 

The coming week promises to be fairly quiet from an economic news standpoint with the following high volatility events scheduled:

 

Monday June 23^rd - German Ifo Business Climate Index
Wednesday June 25^th - ECB President Trichet Speaks, US Core Durable Goods Orders, New Zealand Current Account
Thursday June 26^th - BOE MPC Treasury Committee Hearings, New Zealand GDP & Trade Balance

Visual Analysis & Historical Data

Once again our VA tool will be available for following major news releases. The US housing duo of New Home Sales and Existing Home Sales will both be featured.

The main topic of conversation this week will be if the USD can maintain its recent firm stance against the EUR, CAD, CHF and JPY amongst others.

The main contributing factor to the Dollar’s strength was increased speculation that the Fed will raise interest rates at the August FOMC Meeting. According to interest rate futures there is now a 60% chance of at least a 0.25% hike.

 

The Dollar closed higher on the week against the world’s majors in the face of better than expected retail sales and consumer inflation numbers. However, the data continues to be mixed with Initial Jobless Claims and the University of Michigan Consumer Sentiment both coming in worse than expected.

 

The US economic schedule for the coming week is a busy one. We begin on Monday with three high volatility events: Empire State Business Conditions Index, TIC Net Long-Term Transactions and Fed Chairman Bernanke’s speech at the Senate Finance Committee Health Reform Summit.

 

On Tuesday we will see the release of Housing Starts and the Producer Price Index. Both of these events promise to come with a high level of interest attached to them. At the same time we will also see the slightly less important Core PPI, Building Permits and US Current Account data.

 

Wednesday and Friday promise to be slightly quieter from the point of view of US economic releases. However, high volatility is likely when Fed Governor Kohn testifies before the Senate Subcommittee on Securities, Insurance and Investment. As usual we will also see Initial Jobless Claims. Traders will be keenly watching this data after last week’s 384K, with figures expected to fall slightly to 375K this week.

 

It is not just the US economic calendar that can set the tone for the trading week. We are due several high volatility events from other sources too.

 

On Monday we will see the highly anticipated release of the Eurozone Core CPI YoY. This is the benchmark figure that the ECB uses to set interest rates. There is speculation that the ECB will raise rates in the near future in the face of higher inflation. Core CPI is expected to climb to 1.8% and any surprises to the downside could open the door for further EUR shorting.

 

Further high volatility events this week are as follows:

 

Tuesday:
RBA Meeting Minutes - 02:30
UK CPI YoY - 09:30
German ZEW Economic Sentiment - 10:00

 

Wednesday:
BOE MPC Meeting Minutes - 09:30
BOE Governor King Speaks - 19:30

 

Thursday:
SNB Libor Interest Rate Announcement - 08:30
SNB Monetary Policy Assessment - 09:00
UK Retail Sales - 09:30
Canadian Core CPI - 12:00

 

Friday:
Canadian Core Retail Sales - 13:30

 

Visual Analysis

 

This week the visual analysis tool will be in use for the US PPI, BOE Meeting Minutes and the Canadian Core CPI.

 

Check out the full economic calendar and economic speeches.