During early days of the last week, the US Dollar Index (I.USDX) was dragged down by disappointing economic data-points and dovish comments from some of the FOMC members which tamed speculations that the US Federal Reserve could stick to its plan of four interest-rate hikes in 2016. The downfall was strong enough to counter Friday's eight year low Unemployment Rate and a year's high Earnings detail by fetching the greenback gauge to negative weekly closing for the first time in four weeks. The GBP continued on its up-move and ignored the BoE's downgraded forecasts for near-term Inflation and growth numbers as positive economic releases and a bit hawkish tone of the BoE Governor favored the UK currency's strength while the AUD was hit by the RBA's choice to left the doors open for interest-rate cuts in future. Further, the NZD remained strong against majority of its counterparts due to surprise plunge in Unemployment rate and hawkish comments from RBNZ while the CAD enjoyed the recent strength of Crude prices and registered weekly positive closing. Moreover, weaker USD and risk-off market sentiment continued favoring the JPY and the Gold for one more week.
Unlike last week, the current week might witness less liquid market sessions as there are fewer catalysts scheduled for publish; however, US Retail Sales and a testimony by the US Federal Reserve Chair, coupled with EU Flash GDP, UK Manufacturing Production and Trade Balance, are some of the data-points that might propel some liquidity into the world's largest financial market.
US Retail Sales and Fed Chair's Testimony To Guide USD Moves
With the recently weaker dataflow, except Friday's job report, in addition to nearness with March FOMC meeting, market players are likely focusing more on incoming US details to forecast whether the Fed could actually practice its plan of 1.0% rate-hike during the current year. Hence, January month Retail Sales coupled with Preliminary reading of UoM Consumer Sentiment for the month of February, up for Friday release, become important for the USD traders as it would reflect the state of consumer confidence in the world's largest economy. Moreover, Federal Reserve Chair Janet Yellen's semi-annual testimony on monetary policy before the House of Financial Services Committee and the Senate Banking Committee, on Wednesday and Thursday respectively, will be on market players' radar as comments relating to the future actions of the Fed, in relation to interest-rate hikes, could help predict near-term greenback moves.
The Retail Sales and the Core Retail Sales are both likely to reverse their prior -0.1% mark with +0.1% and 0.0% mark respectively while the Consumer Sentiment Index is expected to mark 92.6 number against the downwardly revised prior to 92.00. Moreover, the US Fed Chair, in addition to testifying the monetary policy stance of the central bank, might also comment on the present economic scenario of the US, if the question arises, which in-turn could help knowing whether the recent downtick in economic numbers really stops the central banker from its planned interest-rate actions for the year 2016 or not.
While lack of major releases, coupled with upbeat forecasts from consumer-centric details, favors the USD up-move, market players would closely observe comments from the Fed Chair. Should the central banker continue remaining hawkish on monetary policy stance, chances of the greenback recovering some of its recent losses can't be denied.
EU GDP To Help Forecast The Euro Trend
Even as the European Central Bank (ECB) announced monetary policy actions in the month of December, the Euro region is still left to witness any positive outcomes and the central bank chief, Mario Draghi, recently said that the global worries might force them to announce additional measures during its March meeting. However, Preliminary readings of Q4 2015 GDP number for the Germany and the EU, scheduled for Friday, become important for the EUR traders as weaker reading increases chances of the ECB announcing another round of stimulus measures in its monetary policy meeting in March.
Having marked the lowest reading in a year, with 0.3% growth rate, the EU GDP is likely to maintain the same 0.3% growth rate for the last quarter of 2015. The German GDP, alike EU number, is also likely to print 0.3% growth rate for one more time. Even as GDP readings are expected to maintain their previous growth numbers, those were the weakest in 2015 and reflect continued need of monetary policy stimulus, which in-turn favors EUR weakness. Should downbeat numbers disappoint the market, chances of a plunge in Euro prices become brighter.
GBP Traders Should Watch UK Trade Balance And Manufacturing Production Numbers
Alike recently upbeat UK releases, monthly details of the Trade Balance and Manufacturing Production, up for publish on Tuesday and Wednesday respectively, are also expected to mark welcome numbers and can help cut speculations that the BoE might also go for interest rate-cut than a hike. The Trade deficit is likely to shrink to -10.4B against -10.6B and the Manufacturing Production is expected to reverse its previous contraction of -0.4% with 0.0% reading. With the scheduled second-tier releases likely joining the recently upbeat UK data-flow, the GBP becomes more likely to extend its near-term pullback except these numbers vary drastically from consensus.
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