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Dollar steady ahead of FOMC

USD

The U.S. Dollar Index, a coefficient used to measure the greenback against its major peers, advanced 0.4% during last week after the U.S. posted higher than expected Consumer Price Index (CPI) variation figures at 5% year over year, beating 4.7% expected from a previous release of 4.2%. The greenback rallied at the end of last week after the solid Michigan Consumer Sentiment Index bolstered the dollar. It currently holds steady as investors de-risk their positions ahead of the Federal Open Market Committee (FOMC) which is due to take place on Wednesday where we are expecting the Fed to “hint” when the committee will start tapering. Policymakers have talked down inflation during the past months, arguing that inflationary pressures are transitory and are expected to ease in Q3. However as CPI variations beat estimates, market participants expect some input from the Fed to ease uncertainty.

  • On Tuesday (06/15): Producer Price Index | Retail Sales | industrial Production | Redbook Index | Capacity Utilization | Business Inventories 
  • On Wednesday (06/16): Building Permits | Import Price index | Housing Starts | Export Price Index 

EUR

The EUR fell 0.54% against the USD by the end of last week registering losses during the last three sessions. Christine Lagarde, President of the European Central Bank (ECB) said last week that it's too early to debate the end of PEPP, but central bankers increased their growth forecasts for the bloc as they focus on a pick up in core inflation which has been lagging. During the weekend, G7 European leaders failed to get Biden to put pressure on the U.K. to break the deadlock over the Northern Ireland (NI) protocol, which had pulled back the currency during the week's opening. This week, the market will turn its attention to the Consumer Price Index for the EU due to be released on Thursday as well as the Eurogroup meeting and EcoFin on Friday.

  • On Monday (06/14): Industrial production | ECB Schnabel speech
  • On Tuesday (06/15): Trade Balance | ECB Lane Speech | ECB Panetta Speech
  • On Wednesday (06/16): Labor Cost | ECB De Guinos Speech
  • On Thursday (06/17): Eurogroup meeting | Consumer Price Index | Construction Output | ECB Lane Speech 
  • On Friday (06/18): EcoFin Meeting | Current Account 

GBP

The pound Sterling retraced 0.37% against the USD amid investors digesting the higher U.S. inflation reading and better Michigan Consumer Sentiment. Additionally, the U.K. government has signed off a decision to delay the final reopening date previously set for the 21st June, due to a recent spike of COVID-19 cases. The reopening news added further pressure on the British pound as it could slow down the pace of economic recovery for the British economy. On the other hand, Prime Minister Boris Johnson hosted the G7 summit in Cornwall, where his European counterparts tried to add pressure in relation to Northern Ireland protocol. President Biden avoided making any strong warnings to Prime Minister Boris Johnson but offered to help ease negotiations. This week, market participants await the Bank of England’s Governor Andrew Bailey’s speech on monday to gauge market sentiment. 

  • On Monday (06/14): BoE’s Governor Bailey Speech
  • On Tuesday (06/15): ILO Unemployment | Claimant Count Change | BoE’s Governor Bailey Speech | Average Earning Incl./Excl. Bonus
  • On Wednesday (06/16): Consumer Price Index | Producer Price Index | Retail Price Index 
  • On Friday (06/18): Retail Sales | Consumer Inflation Expectations

JPY

The Japanese Yen edged lower against the dollar amid the U.S. treasury yields picking up and a solid Michigan Consumer Sentiment survey. The overall market sentiment continues to seek riskier assets as the appetite and confidence recovers alongside the economy. Japanese vaccination rates have been sluggish but recent stats suggest the pace is picking up. However, this week's monetary policy schedule will induce caution among investors, as both Central Banks are scheduled to have their respective monetary policy meetings this week. On Wednesday, the Fed interest rate decision and monetary policy statement will provide some hints of when the market could expect a tapering in the american stimulus. On the other hand, the Bank of Japan (BoJ) is due to announce their interest rate decision and monetary policy statement on Friday, where the market is expecting Governor Kudora to extend the September deadline of its pandemic relief program.    

  • On Monday (06/14): Industrial production | Capacity Utilization
  • On Tuesday (06/15): Tertiary Industry Index 
  • On Wednesday (06/16): Merchandise Trade Balance | Imports | Exports 
  • On Thursday (06/17): Foreign Investment in Japan Stocks | Foreing Bond Investment 
  • On Friday (06/18): National Consumer Price Index | BoJ Monetary Policy Statement | BoJ Interest Rate Decision | BoJ Press Conference 

CAD

The Loonie fell 0.52% against the greenback, edging closer to the lowest level we have seen in the last four weeks. The CAD has been supported by rising oil prices, the West Texas Intermediate (WTI) crude oil reached a three year high closing on Friday above the USD 70 mark per barrel. Last week, the Bank of Canada (BoC) left monetary policy unchanged as unemployment readings have been sluggish for policymakers to adjust policy. This week, BoC Consumer Price Index (CPI) is due to be released on Wednesday where the market is expecting 3.5% year over year for headline inflation. Following the CPI reading in Governor Macklem's speech should provide more colour on the interpretation of these results and hopefully give some insight as to when we could expect a second tapering of the Canadian Stimulus program. 

  • On Monday (06/14): Manufacturing Sales
  • On Tuesday (06/15): Housing Starts
  • On Wednesday (06/16): BoC Consumer Price Index | Whole Sales | BoC’s Governor Macklem Speech 
  • On Thursday ( 06/17): ADP Employment Change | Employment Insurance Beneficiaries | Foreign Portfolio Investment in Canadian Securities 
  • On Friday (06/18): New Housing Price Index

MXN

The Mexican Peso fell back 1.02% during Friday’s trading session amid market participants digesting U.S. inflation figures at 5% and Michigan Consumer Sentiment Index beating expectations. Moreover, Mexico’s National Statistics Institute (INEGI) showed that 2.32 million tourists visited the country in April 2021 registering a 199% increase year over year. The pick-up in the tourism industry shows encouraging recovery signs, but it is still behind its pre-pandemic levels where 3.6 million travelers were registered in 2019. This week, INEGI is due to release the Private Spending Indicator which reflects the levels of consumer confidence and optimism in Mexico. 

  • On Friday (06/18): Private Spending 

CNY

China and Hong Kong remain closed for Bank Holiday today, leaving a lack of Foreign Exchange activity surrounding the Renminbi. However, the week ahead could bring some market volatility on Wednesday as the National Bureau of Statistic (NBS) of China, will release Retails Sales where the market is expecting a 13.6% year over year pick up, lower than the April reading which was released at 17.7%. The retail sales reading will be followed by a press conference from the NBS who will provide insights on the reading benchmarked against Industrial Production.

  • On Monday (06/14): Foreign Direct investment 
  • On Wednesday (06/16): Fixed Asset Investment (YTD) | NBS Press Conference | Industrial Production | Retail Sales
  • On Thursday (06/17): House Price Index 

BRL

The BRL retraced 1.19% against the USD by the end of last week following high consumer confidence indicators in the U.S. and higher than expected domestic demand. The Copa America kicked off on Sunday in Brasilia after Colombia was removed as co-hosts due to the civil unrest in the country. The last minute decision of President Bolsonaro to host the event involves hosting the games without fans in the stadium and teams will be tested every 48 hours while any travel will be done on chartered flights. Moreover this week, the Central Bank of Brazil (BCB) will announce its Interest Rate Decision on Wednesday where the market is expecting to be released at 4.25% after the previous month was held at 3.5%.

  • On Wednesday (06/16): Interest Rate Decision 

Quick Insights

USD: Dollar steady ahead of FOMC

USD: Dollar steady ahead of FOMC

EUR: EUR steps back ahead of inflation data and Eurogroup meeting

EUR: EUR steps back ahead of inflation data and Eurogroup meeting

GBP: Sterling weighs on reopening delays

GBP: Sterling weighs on reopening delays

JPY: BoJ to extend stimulus program beyond September

JPY: BoJ to extend stimulus program beyond September

CAD: Consumer Price Index to set the tone of the Loonie

CAD: Consumer Price Index to set the tone of the Loonie

MXN: Mexico‘s tourism picks up

MXN: Mexico‘s tourism picks up

CNY: Low flow on chinese bank holiday

CNY: Low flow on chinese bank holiday

BRL: Brazil launches last minute Copa America

BRL: Brazil launches last minute Copa America

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