U.S., Aussie and Eurozone Data to be Pivotal in the Coming Trading Week!
After a relatively subdued trading week, price action could pick up once more in the next few days as central bank events are lined up. The first of which is the RBA interest rate decision, which could reinforce the bearish bias on the Australian dollar.
Bear in mind that the Australian central bank just cut interest rates by 0.25% in their previous policy statement, citing the potential downturn in employment and the drop in inflation as their main reasons for easing. The economic picture has scarcely improved for the country, as the jobs report and private capital expenditure readings have hinted that further rate cuts might be needed.
However, the minutes of the recent RBA meeting have indicated that policymakers might wait a while before deciding to lower rates again. If they decide to keep rates on hold for now, the Aussie might enjoy a relief rally at the start of the week but continue its downtrend, as traders predict higher odds of easing in their next statements.
Also lined up for the week is another ECB rate statement, although no actual monetary policy changes are expected for now. In his testimony last week, ECB head Draghi actually sounded upbeat, as he pointed out that some green shoots are seen in the euro zone economy. He is expected to shed more light on the ECB’s role in the Greek debt plans and reinforce the role of capital markets in shoring up growth in the region.
The BOE is also set to make its policy statement mid-week and Governor Carney might emphasize their upbeat bias. After all, MPC members and UK government officials seem confident that the downturn in inflation would translate to stronger spending and growth, although recent data hasn’t shown much promise yet. This event might not have such as strong impact on price action, as market watchers typically wait for the MPC meeting minutes to be released before taking large positions on pound pairs
As always, the US non-farm payrolls report is bound to steal the show on Friday, as another round of strong jobs data could affirm the view that the Fed would hike rates by June. In her testimonies last week, Fed Chairperson Yellen tried to downplay rate hike expectations, clarifying that they’d first update their forward guidance before acting.
A couple of Fed officials gave hawkish hints later on though, renewing June rate hike expectations. The NFP has consistently been printing stronger than expected results so far and another upbeat reading might lead to another long-term rally for the US dollar.
Other major events for the week include manufacturing PMIs from the UK, US, and Canada. More top-tier events are lined up from Australia, including their retail sales and GDP readings, which should shed more light on the likelihood of seeing another rate cut from the RBA sooner or later.
New Zealand is set to have another dairy auction towards the end of the week and another strong surge in prices might be enough to give the Kiwi some wings, as market watchers continue to speculate about an ongoing rebound in the dairy industry. Traders are also keeping tabs on a potential OPEC emergency meeting, as some member nations have been calling for a cut in production in order to keep prices supported.
Potential weekend gaps might occur, as China is set to print its official manufacturing and non-manufacturing PMIs before actual trading starts on Monday. The HSBC readings hinted at a return to industry expansion and confirmation from the government figures could renew expectations of a rebound in the world’s second largest economy, lifting overall market risk appetite as well.