Your Weekly Fundamental View (Feb 06–Feb 10)

Februāris 06, 2017 12:43

Need to know

The main focus of this week is on Asia-Pacific crosses and their corresponding news report. Both AUD and NZD currencies should exert high volatility due to cash rate announcements, statement and pressers. AUD cash rate with RBA statement is due on Tuesday, while RBNZ rate statement and presser are out on Wednesday. Both interest rates for AUD and NZD are expected to remain unchanged.

Coming up

NZD Inflation Expectations Data is due on Tuesday, 7 February.

The report usually measures the percentage that business managers expect the price of goods and services to change annually during the next 2 years.

Why should you care? Expectations of future inflation can manifest into real inflation.

AUD Cash Rate and Rate Statement is released on Tuesday, 7 February.

Source: AUD historical interest rate change

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 statement is the primary tools of RBA Board communication with investors about monetary policy.

Why should you care? Short-term interest rates create immediate, short-term impact in the markets, by providing cues in the currency evaluation and short-term trade setups. Through the statement, traders can get a hint of future outcomes.

NZD GDT Price Index is out on Tuesday, 7 February.

GDT measures the change in the average price of dairy products sold at auction.

Why should you care? It's a leading indicator of the nation's trade balance with other countries.

CAD Trade Balance is released on Tuesday, 7 February.

Most Canadian exports are purchased by the US. If the number is positive, it means that more goods were exported than imported.

Why should you care? Export demands and currency demands are directly linked because foreigners must buy the domestic currency to pay for the nation's exports.

USD Crude Oil Inventories are due on Wednesday, 8 February.

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 6.5m barrels increase.

NZD Cash Rate, Rate Statement and RBNZ Press Conference are issued on Wednesday, 8 February.

Source: NZD historical interest rate change

The rate decision is usually priced into the market, so it tends to be overshadowed by the RBNZ Rate Statement, which is focused on the future and traders look at it to find cues regarding future monetary policy.

Why should you care? Traders could possibly trade NZD on this news report in a form of short-term spike trading. The RBNZ Governor decides where to set the rate after consulting senior bank staff and external advisers.

US unemployment claims are released on Thursday, 9 February.

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. If the actual result comes weaker than the forecast, it could be deemed good for the currency.

Why should you care? The number of unemployed people is an important signal of the overall economic health and could hint at future monetary policy steps.

RBA Governor Philip Lowe speaks on Thursday, 9 February.

The governor will speak at the A50 Australian Economic Forum Dinner, in Sydney.

Why should you care? Whenever the head of Central Bank speaks, there could be volatility in national currency and other crosses.

AUD RBA Monetary Policy Statement is due on Friday, 10 February.

The statement will provide traders and investors with a valuable insight into the bank's view of economic conditions and inflation.

Why should you care? The statement can be either hawkish, neutral, or dovish. Hawkish statement might be good for currency, while dovish statement is expected to weaken the currency.

CNY Trade Balance is released on Friday, 10 February.

The data represents a difference in value between imported and exported goods during the previous month.

Why should you care? The data could move Asia-Pacific currency pairs heavily. Export demand impacts production and prices at domestic manufacturers. Export demand is also linked to currency demand.

GBP Manufacturing Production is released on Friday, 10 February.

Manufacturing makes up the most of total Industrial Production and tends to dominate the market impact.

Why should you care? If the actual result comes out better than predicted, the GBP could bounce. The opposite is true if the result comes out worse than expected.

CAD Employment Change and Unemployment data are released on Friday, 10 February.

The number of unemployed people is an important signal of overall economic health while job creation is an important leading indicator of consumer spending.

Why should you care? Both releases should have an immediate impact on CAD crosses.

USD Preliminary UoM Consumer Sentiment is released on Friday, 10 February

The report measures level of a composite index based on surveyed consumers. Survey of about 500 consumers asks respondents to rate the relative level of current and future economic conditions.

Why should you care? Financial confidence is a leading indicator of consumer spending. USD pairs are impacted by this release.