FX Week Ahead: US data and an upbeat Fed likely to keep the greenback supported
USD: The greenback will remain supported into the Fed
Spot
DXY92.95
Week ahead bias
Mildly Bullish
Weekly range
92.50 – 93.50
1 month target
93.50
The greenback is likely to continue to remain supported into Wednesday’s FOMC meeting. The Fed is likely going to have to acknowledge the above forecast growth and inflation numbers and will have to indicate when tapering will begin and possibly imply a first-rate hike toward the latter part of 2022.
Data wise this week will provide a look at GDP – expected to be 8-9% annualized, personalized consumption data and the PCE deflator reading, both expected to print on the strong side. Durable goods, new home sales and consumer confidence are also set to be released this week. With lockdown concerns fuelled by the Delta variant and emerging market economies lagging on vaccine roll outs, the dollar is likely to remain supported in the medium term.
CAD: Can the loonie continue to gain?
Spot
USD/CAD1.2571
Week ahead bias
Mildly Bearish
Weekly range
1.2450 – 1.2640
1 month target
1.2300
The loonie was the best performing currency last week possibly benefitting from delayed reaction to last week’s BoC tapering. The week ahead is extremely busy – inflation numbers are expected to remain above 3% with the possibility of another spike. The inflation release is likely to support the market’s view that the BoC will end asset purchases by the end of the year and allow the market to speculate about a rate hike in the first half of 2022.
GDP data for May is likely to be a non-event with a muted market impact. Put together, the loonie could have another strong week despite the greenback remaining well supported. The expected trading range for the loonie will be between 1.2560- 1.2650.
EUR: Despite decent growth numbers the euro is likely to remain weak
Spot
EUR/USD1.1766
Week ahead bias
Mildly Bearish
Weekly range
1.1710 – 1.1850
1 month target
1.1800
This week’s data points in the eurozone are likely to have material impact on the single currency. More specifically – 2Q GDP and the flash July CPI release. GDP is expected to print around 1.5% QoQ expansion with hopes for further expansion in Q3 and Q4. A pickup in the CPI to 2.0/2.1% is unlikely to impact the currency after last week’s ECB meeting where they reiterated that they will not consider raising rates until CPI is sustainably at 2% over a 12–18-month horizon.
Other data releases this week will include July’s German Ifo and eurozone confidence surveys for July. In all, the EUR/USD will likely remain soft this week, with an upward adjustment in US money market rates likely pressuring EUR/USD towards major support at 1.1700.
GBP: Looks like there’s more downside risk ahead
Spot
GBP/USD1.3730
Week ahead bias
Mildly Bearish
Weekly range
1.3570 – 1.3900
1 month target
1.4000
The GBP has been really struggling with a double whammy of negative news on the currency and the declining EUR/USD pair. This coming week should be no different for the GBP. July’s FOMC meeting poses further downside risk for the GBP while clashes with the EU on trying to negotiate the post-Brexit trade in Northern Ireland will be GBP negative.
On the data front it will be a quiet week for UK data. July’s Nationwide House prices and June’s consumer credit and mortgage approvals will have very limited impact on the trajectory of the GBP.
Currency Chart
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