- AUD and CAD crosses saw large speculators add to their short exposure with recent data from both economies providing little reason for this trend to change.
- JPY continued to see money flow out however JPY is vulnerable to attracting funds again in the face of plemmeting Gold and weaker comodity prices.
US Dollar: The FOMC statement could be a key driver this week if any further clues, for or against, the famous rate rise are presented. The FED appear to be more Hawkish in recent weeks but this is at a time when global growth continues to dwindle, oil prices plummet further, commodities are within a bear trend and further evidence of a China slowdown make it an environment difficult to justify a rate rise. If the statement fails to deliver then GDP figures on Thursday are another one to watch. GDP for Q2 is forecast around 2.6%, but the markets are still aware of the dire 0.2% printed for Q1.
Australian Dollar: It will be a quiet start to the week until RBA Gov Stevens speaks on Thursday. In last week's speech he highlighted that AUD is dropping as expected but fell short of stating whether it had fallen enough. Business confidence ticked higher and inflation was 'OK' which all points towards rate in hold for the foreseeable future.
British Pound: The potential for a 2016 rate rise continued to drive Sterling higher against AUD and CAD but saw mixed results against the other majors. Cable finished down for the week after producing a Bearish Engulfing Candle following soft retail sales and also struggled against JPY and CHF which benefitted from safe haven flows during Gold's demise. Preliminary GDP on Tuesday is expected to break the bearish trend (which has now seen five consecutive contractions) and rise to 0.7% which may see Sterling regain some of its shine.
Canadian Dollar: The Canadian Dollar only managed to close flat against Sterling last week, finishing the week down against all other major crosses. Weaker oil prices and a gloomier outlook for the economy are to blame, with positive retail sales failing to change sentiment. GDP has been negative four times this year, once positive and another flat – so GDP this week will warrant extra attention. Forecast at 0% a negative print seems more likely with falling commodity prices and, most notably, lower oil prices likely to weigh on growth.
Euro: Any upside potential for EURUSD is likely to be capped by the pending FOMC statement, but if FOMC is a non-event we could see Euro higher. Flash manufacturing data for Germany, France and Eurozone all fell below expectations which produced a Hanging Man Reversal candle on D1. Whilst the negations between Greece and creditors continues to drag on, from the market's perspective, it is on the back-burner for now so not a main driver for Euro crosses this week. Germany business outlook on Monday comes under 'nice to know' data as upbeat and Germany helps support Euro crosses. Later in the week is German retail sales and Eurozone Flash CPI which is forecast to remain at a mere 0.2%. However 0.2% in an environment that has been in a three year downtrend and recently climbed out of deflation could be taken as a positive sign by the markets if it is achieved.
New Zealand Dollar: The Cash rate was reduced to 3% and strong wording of further cuts ahead, ironically, sent the Kiwi Dollar higher last week. The move was presumably sparked by profit taking but the trend remains down and further losses are expected (as long as FED continue to hint at a rate hike). This week Business Confidence will warrant attention as it previously dipped below zero for the first time since March 2011. If business lack confidence and tighten their belts then this will eventually weigh on growth and lower inflation (and lower interest rates).
WEEKLY WRAP: US data back at the helm this week
Last week saw non-US economies have more of a say in their currency direction due to lack of US news but that could change this week as FOMC and GDP data is likely to attract the lime light.