​Turkish Lira’s decline stepped up pressure on EUR (Weekly Review)

2018-08-13
Among all significant events of the last week’s macroeconomic calendar we should highlight the meeting of the Reserve Bank of Australia and the Reserve Bank of New Zealand, as well as the release of the Canada’s labor market data and the inflation data of the US. In full accordance with the forecast of market participants, both central banks didn’t increase their interest rate, but the comments of the Reserve Bank of Australia were perceived as more “hawkish” than the comments made by the Reserve Bank of New Zealand that caused sell outs of kiwi against aussie, against the background of which it was also declining in pair with the US dollar. However, aussie/kiwi growth didn’t manage to keep aussie/dollar from falling for a long time.

According to the comments made by the Reserve Bank of New Zealand, we shouldn’t expect the interest rate increase in the nearest future, which makes the Australian more attractive in comparison with the New Zealander, but against the background of the trade war between the United States of America and China (the main trade partner of Australia), aussie remains vulnerable in pair with USD. Therefore, their decline may continue as indeed the decline of GBP, whose major risk factor is Brexit without any good deal for it. The release of strong statistical data may provide GBP with a short-term support, but in general its outlooks remain negative.

Last week, after the US increased duties for Turkish metals, the tension between these two countries has grown up. Against the background of the Turkish Lira’s decline, the European Central Bank (according to news resources), expressed some concerns about the vulnerability of banks of a number of countries of the European Union, which triggered massive sell outs of EUR both against USD and CHF. As a result, EUR/USD broke the lower limit of the consolidation range and collapsed to the level of 1.1366. Although the impact of the US-Turkish crisis may be overrated, EUR will still remain under pressure until some progress in the relationship between the United States of America and Turkey will arise. But so far, judging by the “combative” mood of Mr. Erdogan, this is currently not the case.

Schedule for this week:

Monday, 13th of August
08:00 GMT – Italy. Consumer price index

Tuesday, 14th of August
02:00 GMT – China. Industrial production;
02:00 GMT – China. Retail sales;
02:15 GMT – China. Foreign direct investments;
06:00 GMT – Germany. Harmonized consumer price index;
06:00 GMT – Germany. Consumer price index;
06:00 GMT - Germany. Gross domestic product;

08:30 GMT – Great Britain. ILO unemployment level (3 m) (June);
08:30 GMT – Great Britain. Average salary including bonuses (3 m/g) (June);
09:00 GMT – Eurozone. Industrial production;
09:00 GMT – Eurozone. Gross domestic product;
12:55 GMT – USA. Redbook retail sale index

Wednesday, 15th of August
00:30 GMT – Australia. Westpac consumer confidence index;
01:30 GMT – Australia. Wage index (qtr/qtr) (second quarter);
08:30 GMT – Great Britain. Core consumer price index;
08:30 GMT – Great Britain. Consumer price index;
10:00 GMT – Great Britain. Inflation report hearings;
12:30 GMT – USA. Retail sales;
12:15 GMT – USA. Production capacities utilization;
12:15 GMT – USA. Industrial production;
16:00 GMT – Germany. Speech by the head of the Bundesbank Mr. Weidmann

Thursday, 16th of August
23:50 GMT – Japan. Investments in foreign obligations;
23:50 GMT – Japan. Foreign investments in Japanese stocks;
23:50 GMT – Japan. Import/export;
23:50 GMT – Japan. Visible trade of balance;
01:00 GMT – Australia. Expectations of consumer price inflation;
01:30 GMT – Australia. Employment level;
01:30 GMT – Australia. Unemployment level;

01:30 GMT – Australia. Percentage of the labor forces in the total population;
08:30 GMT – Great Britain. Retail sales;
12:30 GMT – USA. First applications for unemployment level;
12:30 GMT – USA. Purchasing managers’ index in the manufacturing sector by the US Federal Reserve Bank of Philadelphia;
12:30 GMT – USA. House building starts;
12:30 GMT – USA. Building permission dynamics

Friday, 17th of August
23:30 GMT – New Zealand. Speech by the head of the Reserve Bank of Australia Mr. Philip Lowe;
09:00 GMT – Eurozone. Consumer price index;
09:00 GMT – Eurozone. Core consumer price index;
12:30 GMT – Canada. Core consumer price index;
12:30 GMT – Canada. Consumer price index;

14:00 GMT – USA. Michigan university consumer confidence index.

Author: Anthony Porter, IAFT Analyst

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