USD Bulls Capitulated (Weekly Review)

Last week macroeconomic calendar was in fact full of important events. Among them are the comments of the European Central Bank President Mario Draghi, as well as meetings of the US Federal Open Market Operations Committee and the Bank of England. Although no action was expected from both central banks, attention of financial market participants was drawn to their accompanying statements, which should have shed light on prospects for monetary policy.

From the very beginning of the trading week the EUR bulls got a real blow from Mario Draghi, who has announced risks as for terms of economic growth rates, which could force the Central Bank to introduce additional incentives. It triggered a fresh wave of euro sales, but its decline against the USD to 1.1180 support level was used for buying, and as a result the pair closed the week with rather impressive growth. Thus, in technical terms the prospects for the euro have improved, but in fundamental terms there are still no objective reasons for large-scale buying.

Results of the Bank of England Meeting caused no special resonance in the markets, but the Fed’s rather soft comments allowing to suggest lower interest rates in the foreseeable future contributed to the recovery of the British pound. Expecting this at the July meeting, the USD bulls were getting rid of longs, and as a result a number of its competitors were able to regain the losses incurred earlier. Speculation on reversal of a long-term uptrend has become more frequent on the market, but the USD bears still should be extremely cautious. Results of a possible meeting of the USA and PRC leaders at the G20 summit may affect its dynamics.

Schedule for this week:

Monday, June 24
08:00 GMT – Germany. IFO Business Climate Index;
08:00 GMT - Germany. IFO Business Expectations;
12:30 GMT - USA. Chicago Fed National Activity.

Tuesday, June 25
22:45 GMT – New Zealand. Trade Balance;
22:45 GMT - New Zealand. Import/Export;
23:50 GMT - Japan. BoJ Monetary Policy Meeting Minutes;
13:00 GMT - USA. House Price Index;
13:00 GMT - USA. S&P/CaseShiller House Price Index;
14:00 GMT - USA. New Home Sales;
17:00 GMT - USA. Fed Chair Powell Speaks.

Wednesday, June 26
02:00 GMT – New Zealand. Reserve Bank of New Zealand (RBNZ) Interest Rate Decision;
02:00 GMT - New Zealand. RBNZ Rate Statement;
03:00 GMT - New Zealand. RBNZ Press Conference;
12:30 GMT - USA. Durable Goods Orders.

Thursday, June 27
23:50 GMT - Japan. Retail Sales;
09:00 GMT - Eurozone. Business Climate;
12:00 GMT – Germany. Harmonised Index of Consumer Prices (HICP);
12:30 GMT - USA. Core Personal Consumption Expenditure (PCE) Prices;
12:30 GMT - USA. GDP;
12:30 GMT - USA. Initial Jobless Claims;
14:00 GMT - USA. Pending Home Sales.

Friday, June 28
23:30 GMT - Japan. Unemployment Rate;
23:50 GMT - Japan. Industrial Production;
23:50 GMT - Japan. Tokyo Consumer Price Index (CPI) excluding fresh food;
06:00 GMT – United Kingdom. Nationwide House Price Index;
08:30 GMT - United Kingdom. GDP;
09:00 GMT - Eurozone. Core Consumer Price Index (CPI);
09:00 GMT - Eurozone. Consumer Price Index (CPI);
12:30 GMT - Canada. GDP;
12:30 GMT - USA. Personal Consumption Expenditure (PCE) Prices;
12:30 GMT - USA. Personal Income/Spending;
13:45 GMT - USA. Chicago PMI;
14:00 GMT - USA. Michigan Consumer Sentiment.

Author: Anthony Porter, IAFT Analyst