Indicators of growth and central bank decisions tend to have the biggest impact on FX trade, and next week shouldn’t be any different, especially when it comes to the US dollar, euro, British pound, and New Zealand dollar.
[B]• New Zealand GDP (2Q) – September 22, 18:45 ET[/B]
Upcoming GDP reports are anticipated to show that the New Zealand economy contracted for the sixth straight quarter during Q2, albeit at the slowest pace since the start of the recession. Quarterly GDP is projected to fall by 0.2 percent, compared to a drop of 1 percent in Q1, while the annual rate is projected to rise to -2.6 percent from -2.7 percent. Leading indicators show that the New Zealand economy has continued to feel the impact of the global slowdown and decline in exports, as manufacturing activity slumped 4.8 percent in Q2. On the other hand, retail sales rose through much of the quarter despite a rise in the unemployment rate to a 9-year high of 6.0 percent from 5.0 percent. As it stands, Credit Suisse overnight index swaps are pricing in a 126 basis points worth of hikes by the Reserve Bank of New Zealand over the next 12 months – the most since at least 2006 - but if New Zealand GDP falls more than expected, expectations could reverse and weigh on the New Zealand dollar. However, surprisingly strong readings have the potential to push NZDUSD to fresh 2009 highs.
[B]• Bank of England Meeting Minutes – September 23, 4:30 ET[/B]
The minutes from the BOE’s September meeting will be released. However, they may not expose new information as the BOE’s Quarterly Inflation Report has already revealed dour outlooks by the Monetary Policy Committee. That said, following the latest UK CPI results, which were stronger than anticipated, Credit Suisse overnight index swaps have shifted to price in 78 basis points worth of hikes by the BOE over the next 12 months, up from 66.7 basis points on Tuesday. As a result, if the minutes highlight a clearly dovish bias by the BOE, the market’s focus may shift back toward the central bank’s liberal stance on quantitative easing, and the British pound could fall sharply.
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• Federal Open Market Committee Rate Decision – September 23, 14:15 ET[/B]
At 14:15 ET, the Federal Open Market Committee (FOMC) is widely expected to leave the fed funds target range at 0.0 percent - 0.25 percent, and this should remain the case throughout much of the year. In fact, the FOMC started saying in January that they continue “to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” and they’ve gone on to repeat this since then. Furthermore, the last statement highlighted that the Committee’s policy focus is to support the functioning of financial markets via quantitative easing (QE) and other measures that are likely to keep the size of the Federal Reserve’s balance sheet at a high level. Such statements have historically been bearish for the US dollar, but the statement ultimately shouldn’t ignite significant volatility unless the FOMC announces an expansion of their QE efforts or elimination of them. Generally, signs that the central bank may increase Treasury purchases have been negative for the US dollar, but indications that they will complete the program within the next month or so could send the greenback spiraling higher.
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• German IFO Survey (SEP) – September 24, 4:00 ET[/B]
A steady rally in European equities though July and September to the highest levels since October 2008 along with indications of burgeoning economic growth in Germany is likely to underpin the case for a rise in German business sentiment for the month of September. The IFO survey on the business climate is projected to rise to a one-year high of 92.0 from 90.5, led by rising expectations and mild increases in sentiment on currency conditions. Surprisingly strong results could lead the euro to gain following the news on a very short-term basis, but disappointing data would likely have a greater impact, and could trigger sharp declines in the currency.
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• US Durable Goods Orders (AUG) – September 25, 8:30 ET[/B]
The upcoming release of US durable goods orders is projected to show a 0.3 percent increase in August following a 4.9 percent surge in July, but excluding transportation the index is forecasted to rise by 1.0 percent. Last month’s increase was due almost entirely to a massive rise in non-defense aircraft orders, but with Boeing orders down in August from July, the overall index won’t have such a strong driving force behind it. While the headline result will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. This component fell in August after improving for the previous two months, and a continuation of this dynamic would suggest that growth remains lackluster.
[B]See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.
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