This week is expected to be slow in trading as well, but be careful on low volume moves! The focus at the moment is on the September rate hike. We are looking for hawkish hints, and given the strong US employment data, we have a good chance at enjoying a hike in September. So lets look at the currencies this week:
Monday – We expect volatility to rise as a result of FED’s Lockhart. A week ago his comments caused a 150 pip move up for the USD. We expect him to keep up the tone supporting the USD for a move higher.
Thursday – US retail sales and unemployment claims are to be released simultaneously. In the previous months (June, July) the numbers didn’t offer any direction, giving us the impression of a slow down. However, this time around, any positive numbers other than unemployment will make a strong case for the USD to rise.
Friday – on Friday we will look at the PPI number as a key measurement of inflation on a month to month basis. The market is expecting the PPI to drop to 0.1% from 0.4% in June. Better than expected readings will help the USD, and will increase the chances for a rate hike in September.
Monday – The German ZEW Economic sentiment is expected to increase to 31.9, from 29.7 in July. The economic sentiment weakened in the past months as the Greek crisis and weak industry data put pressure on markets in Europe and worldwide. The outcome of the index is directly correlated to the currency and a move in either way will be reflected on the EUR.
Friday – The German GDP numbers are expected to show a 0.5% growth, a small expansion compared to 0.3% the previous quarter. The EUR will move upward if the rate shows a greater improvement.
Wednesday – UK average earnings are growing while employment shows signs of weakness. Any sign of improvement in unemployment will support the GBP.