Currency Market Trend Analysis: September 12, 2017
By The Numbers: Your FX Week In Review
|Date||Releases / Holiday||Entity|
|September 11, 2017||Housing Starts (Aug)||Canada|
|September 12, 2017||PPI/CPI (Aug)||UK|
|September 13, 2017||ILO Unemployment Rate (Jul)||UK|
|September 13, 2017||Average Earnings (Jul)||UK|
|September 13, 2017||Industrial Production (Jul)||EMU|
|September 13, 2017||PPI (Aug)||USA|
|September 13, 2017||EIA Crude Oil Stocks change||USA|
|September 13, 2017||RICS Housing Price Balance (Aug)||UK|
|September 14, 2017||CPI (Aug)||France|
|September 14, 2017||BoE Asset Purchase Facility||UK|
|September 14, 2017||BoE Interest Rate Decision||UK|
|September 14, 2017||Monetary Policy Summary||UK|
|September 14, 2017||CPI (Aug)||USA|
|September 14, 2017||German Buba President Weidmann speech||Germany|
|September 15, 2017||Trade Balance (Jul)||EMU|
|September 15, 2017||Labour cost (Q2)||EMU|
|September 15, 2017||Industrial Production (Aug)||USA|
Upcoming bank holidays and impactful report releases for select countries.
CAD/USD - Canadian Dollar
Opened last week at 0.8057 and closed at 0.8071.
The CAD rose 0.18% against the USD last week, riding on the BoC’s decision to hike rates. Markets had the BoC rate hike priced in with a 50% likelihood, generating much of this weeks’ upwards momentum. Gains from the rate hike were partially offset by lower-than-expected Canadian labor productivity reports (0.9% instead of 1.0%). Gains were further catalyzed by rising oil, and a flee to safety created by rising US geopolitical tensions with North Korea, damage from hurricane Harvey, and the impending Hurricane Irma. Market sentiment for the CAD continues to be strong, and many are expecting another rate hike come December. A short-term consolidation of gains is possible, but the data continues to come in strong and the medium-term outlook for the CAD is still positive.
1. Housing Starts (Aug): Monday, September 11.
GBP/USD - British Pound
Opened last week at 1.2944 and closed at 1.3210.
The sterling appreciated 2.06% against the greenback last week, largely due to ongoing USD weakness. Stronger-than-expected UK inflation also aided the Sterling, increasing the likelihood of a BoE rate hike. Despite improved inflation figures, many expect that the BoE will not hike rates until Q3 2018, due to poor economic performance and real wage growth. Brexit continues to weigh on the GBP, with reports over the weekend indicating that Prime Minister May believes that Brexit could cost 50BN GBP, due to existing obligations to the EU. This past week, chief EU Brexit talk negotiator Michel Barnier stated that Britain wanted an “impossible” Brexit, warning that the UK needs to choose between a Norway-style deal and “taking back control”. Although the Sterling had a strong weak, it’s underlying weakness is still in play. As the flight to safety calms down, these factors will regain strength and likely initiate a consolidation of this weeks’ gains.
1. PPI/CPI (Aug): Monday, September 12.
2. ILO Unemployment Rate (Jul): Wednesday, September 13.
3. Average Earnings (Jul): Wednesday, September 13.
4. RICS Housing Price Balance (Aug): Wednesday, September 13.
5. BoE Asset Purchase Facility: Thursday, September 14.
6. BoE Interest Rate Decision: Thursday, September 14.
7. Monetary Policy Summary: Thursday, September 14.
EUR/USD - European Central Bank Euro
Opened last week at 1.1918 and closed at 1.2040.
Over the past week, the Euro appreciated by 1.02% against the USD, amid a ECB meeting that gave relatively little forward guidance on the ECB’s QE program. ECB President Draghi stated that he was “Confident that inflation will head towards inflation aim”, despite the continued appreciation of the Euro. Draghi indicated that this Autumn will decide on the calibration of policy beyond this year. Despite the lack of direct commentary, some expect that the ECB will announced a tapering of its QE purchasing at the next meeting. This expectation is in-part due to the approach of the ECB’s self-imposed limits on its QE program. The underlying factors causing EUR appreciation against the USD are still active. Continued EUR strengthening is likely, but European real wage data may need to strengthen for this trend to hold.
1. Industrial Production (EMU, Jul): Wednesday, September 13.
2. CPI (France, Aug): Thursday, September 14.
3. German Buba President Weidmann speech (Germany): Thursday, September 14.
4. Trade Balance (EMU, Jul): Friday, September 15.
5. Labour cost (EMU, Q2): Friday, September 15.
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