US Dollar, Commodity Dollars to See Growth and Confidence Data, Rate Decision

Compared to last week, event risk will be fairly low in the coming week. Nevertheless, the Reserve Bank of New Zealand’s policy decision, Japanese GDP revisions, Australian employment numbers, US retail sales and US consumer confidence could impact the already-volatile commodity dollars, Japanese yen, and US dollar.

[B]• Reserve Bank of New Zealand (RBNZ) Rate Decision – June 10[/B]
For the first time since June 2008, the Reserve Bank of New Zealand (RBNZ) is anticipated to leave the Official Cash Rate target unchanged at 2.50 percent. In April, the RBNZ cut their official cash rate target last night by 50 basis points, as the “world economy deteriorated more than expected” during Q1. Looking to the RBNZ Governor Alan Bollard’s policy statement, it is clear that the central bank has cut back their inflation expectations due to weaker global growth and tight financial conditions. Furthermore, the RBNZ anticipated that the “adverse economic forces generated by the crisis to remain dominant throughout 2009,” with the “timing and extent of recovery” remaining “highly uncertain.” Adding to this bearish sentiment, the RBNZ expected to leave the OCR at or below current levels through the end of 2010, which weighed heavily on the New Zealand dollar at the time. A reiteration of this bias should do the same this time around, but if the central bank strikes a more neutral tone, the New Zealand dollar could actually rally.

[B]• Japanese Gross Domestic Product (GDP) (1Q F) – June 10[/B]
On June 10 at 19:50 ET, Japan’s Cabinet Office will release their final growth readings, which should confirm that the economy contracted for the fourth straight quarter in Q1 2009. However, this reading is anticipated to be revised higher once again, this time to -14.9 percent from -15.2 percent. While this would still be the worst result on record, the revision has potential to provide a boost to the Japanese yen, which is what we saw with the release of the preliminary reading on May 19. On the other hand, a revision to the downside could weigh heavily on the low-yielding currency.
• Australian Employment Change (MAY) – June 10[/B]
The Australian labor markets started to deteriorate during the second half of 2008, and this is likely to continue through 2009. While we did see a surprise improvement in April, the May results for projected to show that the unemployment rate rose back up to 5.7 percent from 5.4 percent while the net employment change is anticipated to fall by 30,000. The latter report tends to have a greater impact on the Aussie since the figure rarely meets expectations and can lead to volatile short-term price action for the Australian dollar immediately following the news at 21:30 EDT.

[B]• US Advance Retail Sales (MAY) – June 11[/B]
The Commerce Department is forecasted to report that US retail sales rose 0.5 percent in May after tumbling 0.4 percent in April, and excluding autos, retail sales are anticipated to increase by 0.2 percent. However, there is potential for a worse-than-expected result, as the latest ICSC chain store sales numbers show that consumption plunged by 4.6 percent in May from a year ago. The response of the US dollar to the results will be interesting as the currency finally responded to fundamental forces following the release of US non-farm payrolls for the month of May. Prior to that, risk trends had been the predominant driver of price action for the greenback, so this round of advance retail sales may serve as a good gauge of how strong risk links are in the FX market.

[B]• U of Michigan US Consumer Confidence (JUN P) – June 12[/B]
The preliminary reading of the University of Michigan’s consumer confidence index for the month of June is forecasted to rise for the fourth straight month to match the March 2008 high of 69.5. As it stands, recent improvements in the index have been due to increased optimism on the economic outlook, as sentiment on current conditions actually slipped between May and April, suggesting that consumers are seeing any economic changes in their daily life, but are convinced that they will see it eventually. Indeed, the pace of job losses has started to slow, but if consumers don’t start to see more encouraging signs of growth in the near-term, confidence in the outlook could start to fall.
[B]See the [/B][B]DailyFX Calendar[/B][/I][B][I] for a full list, timetable, and consensus forecasts for upcoming economic indicators.
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