Weekend Summary & the Week Ahead

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Weekend Summary & the Week Ahead

8:30 AM (EST) Update

I finally had all 4 of my wisdom teeth out and officially got rid of my wisdom all at once! Are you still going to trust me with my investing strategies? Catch a “before/ after surgery” photo at the end of this update… But first! Let’s take a look at our dancing currency pairs on the forex dance floor and see what they’ve been up to, plus 4 central bank events to watch out for this week (to match the number of the wisdom teeth I pulled out.)

Asian Session Summary

While many were celebrating the Rosh Hashana new year Sunday night in New York, forex participants in Asia were already up and about, shaking the markets.

  • Chinese retail sales were up by 10.8%  vs. 10.6% forecast, higher than 10.5% previous
  • Chinese industrial production ticked up by 6.1% vs. 6.3% forecast, also higher than 6.0% previous
  • Chinese fixed asset investment came in lower at  10.9%  vs. 11.2% forecast
  • Japanese industrial production was down by 0.8% in July vs. estimated 0.6%
  • Japan’s July tertiary industry activity up by 0.2% as expected

Is China making up for the past mistakes? Probably. And guess who was immediately affected by the positive Chinese data:

The one and only, Mr. Aussie. He danced up against a bunch of his forex partners including Ms. USA, Japanese Yen and Kiwi. As I discussed in last week’s update, the AUD/USD pair could even be changing directions for good.

Mr. Japanese Yen got a bit down on the economic data but continues to dance within the narrow range we identified last week against Ms. USA.

Coming up This Week

1- RBA Meeting Minutes (Tuesday at 1:30 PM GMT)

Mr. Aussie could be exposed to more beats as Reserve Bank of Australia (RBA) release the transcript of their latest monetary policy meeting.
Are the kangaroo lovers going to reveal cautious comments? Or are they going to be upbeat? Investors will be on the lookout for any cautious comments on weakening inflationary pressures and slowing external demand, which might then push the Aussie down under. On the other hand, reassuring remarks from most RBA policymakers and less concerns over Aussie/ Chinese relations from Governor Stevens could allow Mr. Aussie to continue up and mighty.

2- BoJ Rate Decision (Tuesday, Asian Session)

The Land of the Rising Sun may be up to some Japanese dance moves as well. Officials from the Bank of Japan (BOJ) are set to announce their monetary policy decision anytime on Tuesday, most likely towards the end of the Asian trading session. No actual changes on interest rates or bond purchases are expected to be announced, which will allow Mr. Japanese Yen to continue on his new favorite range.

However if easing bias rubs off on most of the BOJ policymakers, their rate statement might sound a little more downbeat this time around, pushing the yen much lower against most of its forex dancing partners.

3- SNB Monetary Policy Assessment (Thursday, 8:30 AM GMT) 

It’s been a while since something really shook the Swissy on the forex dance floor. And this week, the Swiss National Bank (SNB) isn’t expected to make any major changes to their current monetary policy either. However after the surprise jawboning of January 2015, we can’t fully rely on these sort of expectations anymore can we?

SNB officials pay extra close attention to the EUR/CHF exchange rate when it comes to setting the ideal trading level for the Swiss currency. Although the Swiss central bank already removed the peg at 1.2000 in January this year and the franc continues to weaken against the euro, SNB officials might still decide to throw in a few more dovish remarks since the ECB has previously expressed their openness to further easing. 

4- FOMC Statement (Thursday, 6 PM GMT)

If the above wasn’t enough, the all important Federal Open Market Committee (FOMC) is also set to release their latest economic estimates. Most market participants seem to have accepted that a rate hike ain’t bound to take place this month so dollar traders are just waiting to find out if a liftoff is still possible before the end of the year.

Data from the U.S. economy has been more or less stable, with some sectors showing a slow but steady pace of improvement. Employment growth has been subdued while inflation could face headwinds, suggesting that Fed head Yellen could refrain from announcing any tightening moves for now. Even so, interest rate projections from the FOMC members could still allow Ms. USA to stay strong, especially if the statement reveals that the Fed is still on track to tighten sooner rather than later.

And… as promised here is a before/ after pic after the wisdom teeth removal surgery. I look like a watermelon!

and one more…