Your weekly fundamental view (Sept 19-23)

September 19, 2016 14:25

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Need to know

This week's main focus is the release of the Federal Reserve's Open Market Committee (FOMC) on Wednesday, 21 September. With the current Inflation rate at 0.8% per annum last month, we suggest keeping an eye on raw commodities prices (especially crude oil) - as these feed into prices generally. Also note that we expect the US Fed to sit on the sidelines until the new US president is announced.

Coming up

Reserve Bank of Australia (RBA) meeting minutes released Tuesday, 20 September. The RBA's detailed meeting minutes should provide insights into various economic conditions. Why should traders care? Economic conditions influence the RBA's decision on where to set interest rates.

Bank of Japan (BOJ) monetary press conference on Wednesday, 21 September. The BOJ will communicate its monetary policy to investors, followed by a press conference. Why should traders care? This policy provides the economic outlook and clues on the outcome of future votes. If it is more hawkish than expected, we think it could be good for Yen and vice versa. Regarding the conference - equities (Nikkei-JPY225) and Yen pairs tend to be very volatile before / after the conference.

FOMC statement and Federal funds rate are out Wednesday, 21 September. The Federal Reserve System (Fed) uses employment figures and inflation levels to decide their monetary policy. Their report usually includes the FOMC's projection for inflation and economic growth over the next two years, plus a breakdown of individual FOMC member's interest rate forecasts. Why should traders care? The report reflects the economic outlook and offers hints on the outcome of future votes. It could also set new USD trends, as the USD is a safe haven currency.chart.jpg

NZD official cash rate released Wednesday, 21 September. Reserve Bank of New Zealand (RBNZ) will announce the interest rate that banks lend balances (held at the RBNZ) to other banks overnight. Why should traders care? If the actual result is better than expected, we think it's good for the NZD currency.

European Central Bank (ECB) president Mario Draghi speaks on Thursday, 22 September. Mr Draghi will speak at the European Systemic Risk Board annual conference in Frankfurt. Why should traders care? If he is hawkish about the eurozone economic outlook or if there are any clues about interest rate hikes, it will likely boost the euro currency and vice versa.

Core CPI and core retail sales data released on Friday, 23 September. CPI data is important for overall inflation. It evaluates currency that might lead the central bank to eventually raise the interest rate. Core retail sales gauges the spending trend, by estimating the change in total value of sales at the retail level. Why should traders care? If the CPI result comes better than the forecast number, it will likely provide a boost in CAD currency strength - same for retail sales. Traders usually capitalise on buying opportunities on CAD currency, if the data is good enough (e.g. selling USD/CAD).