Your weekly fundamental view (August 8-12)

August 08, 2016 16:24

Need to know

The main focus of this week, is the New Zealand rate. The Reserve Bank of New Zealand (RBNZ) will meet on Wednesday to release a statement on how they will achieve their inflation targets and official cash rate, as well as their monetary policy and its effects since the last statement's release.

Coming up

The RBNZ Monetary Policy statement and press conference occurs Wednesday, 10 August. The statement of the official cash rate is important in the overall currency evaluation. We usually see the official rate priced in the markets, so it tends to have less initial impact than this statement and related press conference. The press conference is about 30 minutes long and has two parts - a prepared statement and press questions. The market is predicting a 0.25% cut. The previous rate was 2.25%, so the expected rate is 2.00%. If it happens as forecast, traders will look to initially sell NZD/USD and NZD/JPY. Why should traders care? Short-term interest rates create immediate and short-term impact in the markets, by providing cues in currency evaluation and short-term trade setups. Through the statement, traders can get a hint of future outcomes.

Crude oil inventories ar released Wednesday, 10 August. A build-up in crude oil inventories usually signals decreasing demand from refiners. On the other hand, a drop would signal that refiners are still producing at elevated levels and the inventory overhang in oil products could continue. This is primarily a US indicator, but it also affects CAD due to Canada's huge energy sector. Previous data showed a 1.4m barrels increase and it was the second consecutive increase in numbers. Why should traders care? The price of petroleum products influences inflation, which impacts oil-dependent industries.

US unemployment claims are released on Thursday, 11 August. These claims are the earliest national economic data, representing the number of individuals who filed for insurance for the first time during the past week. Previous data shows 269k vs. 265k forecast for this week. Why should traders care? The number of unemployed people is an important signal of overall economic health and could hint at the future monetary policy steps. If the actual numbers are less than predicted, it will strongly influence currency.

German GDP data will be released on Friday, 12 August. There was a 0.7 % expansion in the Q1, but current forecast predicts only 0.3 % expansion for this eurozone-leading economy. This report measures the overall change in the inflation-adjusted value of all goods and services produced by Germany. As such, it affects the Eurozone too. If the result comes better than expected, traders might start buying Euro against the Dollar. Why should traders care? GDP data is the main gauge of the economy's health.

The University of Michigan preliminary consumer sentiment comes on Friday, 12 August. There are two versions of this report - preliminary and revised. The preliminary report is released earlier, with a revised report coming out right after that. The consumer sentiment consists of a survey where five hundred consumers ask respondents to rate the relative level of current and future economic conditions. If the actual numbers come out better than expected, it will be good for currency and the Dollar should rise. Conversely, if the numbers come out worse than predicted, USD will weaken. The current forecast is 91.5. Why should traders care? This report shows financial confidence in the US economy, which is a leading indicator of consumer spending.