#Forex: 5 Key Events to Watch in the Week Ahead Get ready for an extremely busy week in the financial markets. Central bankers around the world expressed concerns about low volatility and if there is an opportunity for bigger moves in currencies, it could occur in the coming week. The recent decline in Treasury yields put pressure on the dollar but given the lack of market moving U.S. data, the decline has been relatively shallow. Whether the dollar finds support or extends its losses will hinge on not one, but as many as 4 of next weeks Top 5 event risks: 1. Janet Yellens Semi-Annual Testimony on the Economy and Monetary Policy 2. U.S. Earnings - JPM, Google, Goldman and GE 3. Chinese Q2 GDP 4. U.S. Retail Sales 5. U.K. Consumer Prices and Employment Based on the FOMC minutes, in June the Federal Reserve was optimistic about the outlook for the U.S. economy (they plan to end QE in October) but reluctant to provide a clear timing on tightening. Of these 5 events, the most important will be Janet Yellens semi-annual testimony on the economy and monetary policy on Tuesday. Everyone wants to know when the Fed will start raising interest rates so rest assured, members of Congress will pepper her with questions about tightening. While Yellen may acknowledge recent labor market improvements, dont count on her providing specifics on when rates will rise outside of a long period after Quantitative Easing ends. It is in the central banks interest to give the market an opportunity to react to the end of QE before signaling a plan to raise rates. If bond yields spike after QE ends, they could always choose to delay tightening and if theres no reaction, they could proceed as planned and raise rates in mid 2015. Theres no benefit to providing guidance at this time when their views could change in October. While Yellens testimony is not expected to satisfy dollar bulls, we do not see the greenback falling to new lows because at the end of the day, the outlook for the U.S. economy is brightening. Retail sales are expected to rebound in June, lending support to the dollar. The earnings season also kicks into high gear with results expected from JPMorgan, Goldman Sachs, Google and General Electric. Disappointing earnings from Wells Fargo & Co. made investors nervous about next weeks results but a decline in stocks could actually be positive for the dollar versus high beta currencies such as the euro and British pound. Finally, we have a number of important Chinese economic reports scheduled for release including Q2 GDP and industrial production. Last weeks disappointing Chinese trade numbers caused currencies to sell off by raising concerns about the sustainability of Chinas recovery. We expect next weeks Chinese economic reports to increase the volatility on currencies and more specifically determine whether AUD and NZD fizzle at current levels or resume their rise.
Posted on: Sat, 12 Jul 2014 11:47:20 +0000
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