A Busy Week Ahead

With little on the economic calendar today, markets brace themselves for a decisive week ahead that will gauge the near term trend for major currency pairs. Although the Fed is likely to leave its stimulus measures unaltered in this week’s policy meeting, the Fed Chairman’s press conference will hold most of the market’s attention in decoding any hints to the tapering of QE3. Across Europe, PMI readings will attract attention in order to ascertain whether the region is paving the way for an escape from a prolonged recession. The UK also has an action packed week ahead, with traders keeping a close watch on consumer price inflation, retail sales and the BoE minutes for further clarity to the nation’s economic prospects.

Pound Sterling – UK Markets

On Friday, Sterling regained its upward momentum against the US Dollar and inched closer to the 1.57 mark, as lacklustre US macro data eased fears of the Fed scaling back its stimulus measures sooner rather than later. Meanwhile, the Pound is trading in a tight range against the US Dollar and the Euro in today’s trading session, amid a lack of major events to trigger risk appetite. On the domestic front, Rightmove reported that the average asking price for a home in the UK rose at a slower monthly pace for June. On account of a light economic calendar today, markets are likely to keep an eye on the consumer price inflation data due tomorrow to gauge price pressures in the nation. Meanwhile, with the latest economic data offering evidence of the British economy gathering momentum, all eyes and ears will be on the BoE minutes due this Wednesday, for further insights into the issues that played on the minds of policymakers. Retail sales and public finances are the other significant economic indicators that have the potential to drive market sentiment during this week’s session.

US Dollar – US Markets

The US Dollar pared its initial session gains against the majors and moved lower in Friday’s trading session following the release of downbeat US economic data. Data revealed that US industrial production unexpectedly recorded a flat reading for May on the back of weakness in utilities. Moreover, Reuters/ Michigan confidence index slipped back from its six year high recorded last month, further confounding traders over the nation’s growth outlook and the Fed’s future policy moves. Meanwhile, markets are expected to keep an eye on the NAHB housing market data due later today to gauge sentiment among homebuilders. The Empire State manufacturing activity for June also features on today’s economic calendar and will provide early insights into the nation’s manufacturing sector performance for this month. Although a raft of key economic releases are scheduled during this weekly session, most of the market’s attention will revolve around the consumer price inflation data due tomorrow and the FOMC meeting scheduled this Wednesday. With recent voices echoing with the prospect of the Fed tapering its bond purchase programme, any indication by the Fed Chief on this front will prove decisive for the US Dollar.

Euro – European Markets

Market hopes of the Fed continuing its ultra-loose policy stance received a boost, following the release of dismal macro data from the US on Friday, leading the Euro to strengthen against the greenback. With investors remaining on the sidelines ahead of the crucial FOMC meeting due later this week, the single currency is trading in a tight range against the greenback in today’s trading session. On the macro front, data released on Friday revealed that the situation in the region remains precarious, as employment in the Euro zone declined further for the first quarter of 2013. With dismal economic data from the region showing no signs of abating, markets look forward to the Eurogroup meeting commencing later this week. Additionally, the ZEW sentiment survey and manufacturing, as well as services PMIs across major European economies scheduled later in the week, will be deciphered for gauging the region’s second quarter performance. With an apparently lacklustre day ahead, the Euro zone trade balance data scheduled for release later today is expected to grab market focus.

Other Currencies – Highlights

Disappointing sets of macro indicators from the US coupled with upbeat macro data in New Zealand have helped the Kiwi Dollar to trade higher against its US counterpart in today’s trading session. Data released overnight revealed that services activity in New Zealand remained flat at a seven month high for May, with all five main services sector sub-indices in expansion territory. Moreover, Westpac NZ reported that consumer morale in the nation climbed to its highest level in three years for the second quarter of 2013. However, with first quarter GDP data due this Wednesday expected to reveal a slower pace of growth, it remains to be seen whether the Kiwi Dollar is able to hold on to its gains against the US Dollar. Meanwhile, current account balance and ANZ consumer confidence index due this week are also expected to grab market focus. Apart from domestic events, developments taking place on both sides of the Atlantic during this weekly session will prove decisive for the near term trend in the New Zealand Dollar.