Forex focus this week:comments from several central bank officials and China economic data
This week is an important week for global financial markets, as central bank officials from multiple countries will deliver speeches, providing investors with more clues on the timing of interest rate cuts. In addition, the multiple economic data that China will release is also worth market attention.
Key points:
- Escalation of Mideast conflict puts dollar and yen in focus.
- In the U.S., retail sales and Fed Chairman Powell will be the focus after the release of the recent inflation report.
- On Tuesday, markets will focus on Chinese economic data as investors await the Chinese government's fiscal stimulus package.
News from the Middle East may trigger investor demand for safe haven assets on Monday. The US dollar and Japanese yen will become targets for investors to escape risky assets. Nevertheless, investors should also consider this week's economic data and major central bank comments.
Dollars
On Monday, national retail sales and the New York Empire Manufacturing Index will make the US dollar the focus. After the US CPI report exceeds expectations, retail sales data may have a greater impact. The upward trend of consumer spending may trigger demand driven inflation and delay the Federal Reserve's interest rate cuts.
The real estate industry and industrial production data will be released on Tuesday. The recent US economic indicators have raised market expectations that the US can avoid falling into a recession. Economists believe that the real estate market is a barometer of the US economy. The downward trend in construction permits and housing starts may indicate a weak demand environment. As investors monitor the macroeconomic environment, industrial production data also needs to be considered.
On Thursday, the number of people applying for unemployment benefits and the Philadelphia Federal Reserve Manufacturing Index are worth investors' attention. The unexpected surge in the number of first-time applicants for unemployment benefits may have a greater impact. The deterioration of the labor market situation will affect wage growth, reduce disposable income, and suppress consumer spending.
In addition to data, investors should also pay attention to the comments of FOMC members. Federal Reserve Chairman Powell is scheduled to deliver a speech on Tuesday. FOMC members Mary Daly (Mon), Loretta Mester (Wed), Michelle Bowman (Wed), Raphael Bostic (Thurs), and Austan Goolsbee (Fri) will also deliver speeches.
Euro
On Monday, industrial production data from the Eurozone will affect investor interest in buying the Euro/USD. Better than expected data may indicate that the macroeconomic environment is improving. However, these data are unlikely to affect the interest rate path of the European Central Bank. Manufacturing accounts for less than 40% of the eurozone economy.
On Tuesday, Eurozone trade data and the ZEW economic status index for Germany and the Eurozone will be monitored. Trade data will showcase the demand environment for the first quarter to the market. The ZEW Economic Confidence Index may have a greater impact as the European Central Bank predicts an improvement in economic conditions in the second half of 2024.
On Wednesday, the final inflation data for the eurozone will pique investor interest. The revision of preliminary data may affect the interest rate path of the European Central Bank. The market expects the European Central Bank to cut interest rates in June.
On Friday, Germany will release producer price data. Producer prices are the main indicator of inflation and may affect the timing of the European Central Bank's interest rate cuts.
Following the ECB monetary policy decision, investors should track ECB member chatter. ECB Chief Economist Philip Lane is on the calendar to speak on Monday. ECB Executive Board Members Piero Cipollone (Wed), Isabel Schnabel (Wed/Thurs), and Luis de Guindos (Thurs) will also deliver speeches.
Pound
On Tuesday, the labor market data for February in the UK will affect investor demand for the pound. The weak labor market conditions and slower wage growth may increase market expectations for a rate cut by the Bank of England.
On Wednesday, the UK will release inflation data for March. If the inflation data is lower than expected, it may further affect market expectations for the Bank of England's interest rate cut.On Friday, retail sales data for March in the UK will attract investors' attention. The upward trend of consumer spending may trigger demand driven inflation and affect the timing of interest rate cuts by the Bank of England.
In addition to data, investors should also consider comments from the Bank of England. Bank of England Governor Andrew Bailey is on the calendar to speak on Tuesday and Thursday. Monetary Policy Committee members Sarah Breedon (Mon), Megan Greene (Wed), Jonathan Haskel (Wed), and Sir Dave Ramsden (Fri) will also deliver speeches.
Canadian Dollar
On Monday, housing construction and wholesale sales data in Canada will attract market attention. Lower than expected data may put pressure on the Canadian dollar, but it is unlikely to affect the interest rate path of the Bank of Canada.
On Tuesday, Canada's March inflation data will be released. If the inflation data is low, it may increase investors' expectations for a rate cut by the Bank of Canada.
As the inflation report is released, investors also need to pay attention to comments from the Bank of Canada. Bank of Canada Governor Tiff Macklem is on the calendar to speak on Tuesday.
AUD
The labor market data for March in Australia will affect investor demand for the Australian dollar. The weak labor market conditions may affect wage growth and disposable income levels. Consumers may reduce their consumption of non essential goods and curb demand driven inflation. The weak inflation outlook may support investors' expectations for a rate cut by the Bank of Australia.
Economic indicators from China will affect the market.
New Zealand Dollar
On Wednesday, the inflation data for the first quarter will affect investor demand for the New Zealand dollar. If the inflation data is higher than expected, it may affect investors' expectations for the Bank of New Zealand's interest rate cut and the short-term trend of the New Zealand dollar.
Economic indicators from China will affect the market.
Japanese Yen
The machinery order data for Monday and February may affect investor demand for the Japanese yen. In the context of a weak macroeconomic environment, the Bank of Japan may maintain a zero interest rate policy.
On Wednesday, the trade data for March will attract the attention of investors. Trade terms may provide more guidance for the global demand environment.
On Friday, the inflation data for March will attract the attention of investors. This number is consistent with the salary increase in spring. If the inflation data is higher than expected, it may affect the interest rate path of the Bank of Japan.
Investors must also monitor the comments of the Bank of Japan and the Japanese government on the yen.
In addition, news from China is also worth market attention. On Tuesday, China's first quarter GDP, industrial production, retail sales, fixed assets investment and unemployment rate data will be released.
If the data falls below expectations, it may trigger investor expectations for the Chinese government's fiscal stimulus plan.
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