PREVIOUS WEEKLast week fundamental economic data were very much muted by the US Presidential Election, with Trump getting elected as the 45th US President. The US equities market sold off strongly, with the yen strengthening as Trump was leading in the vote count. But eventually reversed strongly post elections. Sounds familiar? Very similar scenario during the Brexit vote too!
While we do expect the market to sell off too, we need to acknowledge that ‘the market is always right’. We are not to force our analysis onto the market, but simply plan out our action plan, and respond accordingly.
The strong recovering in the US dollar and equities market can be attributed to Trump’s toning down from his radical policies and decisions after him winning the election.
On the other side of the market, not many traders even talk about, is the rate cut from RBNZ by 25 basis points. The overall tone from RBNZ remains dovish, with the usual stance of favouring a weak kiwi. The kiwi sold off more than 250 pips, dragging the Aussie along too.
FOCUS FOR THE WEEK Next week, we are still expecting the market to track and react to any sentiment shift caused by Trump’s policies and decisions. Economic news side, the focus will be on the kiwi, pound, and the US dollar.
Starting Tuesday, we have New Zealand Retail Sales with an drastic drop in the estimates from previous 2.3% to 0.8%. A miss on this data can see the sell off from last week continue putting pressure on the kiwi.
Later in the London session, we have the UK CPI expected to come in at 1.1% slightly better than the previous 1.0%. The UK fundamental has been resilient post-Brexit; and with the recent court ruling announcement, any positive economic data will support the upside on the pound. Ending off the day, we have US Core Retail Sales expected to remain similar to previous data of 0.5%.
Wednesday focus will be on UK Average Earnings Index and Claimant Count Change. A positive surprise to any of these data would continue to see the pound being supported to the upside.
Thursday starts off with Aussie employment data. While Employment Change is expected to increase by 20.3K, Unemployment Rate is expected to increase to 5.7%. Trading the Australia labour data can be very tricky and best to avoid trading this risk event.
Later in the day we have UK Retail Sales expected to come in at 0.5% versus the previous 0.0%. Overall, we are seeing expectations on UK fundamental economic to be rather positive. Should these data continue to be supported, we shall see more upside on the pound.
In the US session, we have US Core CPI with an estimates of 0.2% versus the previous data of 0.1%. While it is still crucial to keep track on the economic performance of the US, we believe that the probability of a 2016 rate hike is very unlikely.
Ending off the week, we have ECB President Draghi speaking during the European session on Friday; and the Canadian Core CPI expected to come in slightly better than previous at 0.3% versus 0.2%.
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