For the better part of this past week, the Euro, Japanese Yen and British
pound have been trapped within a tight trading range against the US dollar. Even
though the moves in all 3 of these currency pairs have been relatively
significant, especially in the EUR/USD, they pale in comparison to the moves in
the Australian and New Zealand dollars.
Currencies in Play Next Week:
Euro
Canadian Dollar
British Pound
Euro
The Euro staged a very strong rally against the US dollar after quietly
selling off for the past 3 days. The move was due almost entirely to the US
numbers as the Euro started to gain strength quickly following the University of
Michigan Consumer Confidence report. Eurozone economic data was actually bearish
for the currency with the trade surplus swinging into a deficit in the month of
March. This provide evidence that the strong euro is finally weighing on the
region’s economy. Fundamentals will be heating up for the Euro next week with
German producer prices, the ZEW survey, IFO and PMI reports due for release. We
actually expect most of the numbers except for the inflation reports to be Euro
negative. With factory orders and industrial production turning negative, it
would be a surprise if business sentiment managed to
improve.
Canadian Dollar
The Canadian dollar will be a big focus with consumer prices and retail sales
due for release. I expect CPI to be hot and retail sales to be weak, but that
depends upon the level of wholesale sales.
British Pound
The recent
strength of the British pound will be tested next week by the busy economic
calendar. After hitting an intraday low of 1.9363 earlier this week, the
currency has carved out a near term bottom against the US dollar. Like the rest
of the world, the only reason why the central bank has stopped cutting rates is
because of inflation. Even though the labor market deteriorated for the fourth
straight month, the British pound gained strength because both consumer and
producer prices increased more than the market expected last month. The minutes
from the latest Bank of England meeting will be released next week. Although
they left interest rates unchanged at 5 percent, the key will be their voting
record. At the prior meeting 6 members supported the 25bp rate cut, one member
called for a 50bp rate cut while another called for no easing at all. We suspect
that more members would have favored the most recent pause. In addition to the
BoE minutes, we are also expecting UK retail sales and the second release of
first quarter GDP.
Australian Dollar Hit a 24 Year
High
The Australian dollar hit a new 24 year high.
