The week seems to end with a big negative surprise due to macroeconomic data from the US economy, where PMI indices for manufacturing and services and orders for durable goods turned out to be lower than the market expectations. As a result, investors attention may focus on further publications from the US.
Thursday and Friday brought a strong turnaround for the US dollar, while Friday's US data, worse than expected, strengthened the USD depreciation. The key day reversal pattern might have appeared on the chart, so the behaviour of the US currency next week will be able to confirm or negate the currently observed reversal. The macroeconomic calendar for the next week including data from the USA should draw attention. It will include a publication on the revision of GDP for the first quarter, a report on American spending, including PCE price indexes, and a report by the University of Michigan on inflation expectations.
On the other hand, for the British pound, the No. 1 event may be the fight for the succession of the British Prime Minister after the announced resignation of Theresa May. Her successor may probably be more eurosceptic. Ultimately, however, the new leader will face the same challenges as Theresa May. It is likely that the volatility in the British pound may still be higher, as they may increase the chances for hard Brexit, and also expectations for interest rate hikes by the Bank of England may decline. These are factors that may deepen the depreciation of the British currency.
It is also worth paying attention to next week's Canadian dollar price, which has been in consolidation for a long time. On Wednesday, we will know the decision on interest rates, and on Friday the GDP data will be published. During the last decision, the Bank of Canada assured that it would assess the appropriate degree of accommodating monetary policy depending on the development of the situation, including household spending, the oil market and global trade policy. The central bank gave up forward guidance and switched to the current response to incoming information.
It should also be noted that Monday will be a day off in the US and the United Kingdom, so the two main centers of trade in the currency market will not be active.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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