SMATS FX Weekly Market Report | Monday 12 October 2020

USD

Rising positive risk sentiment sent the US Dollar to the bottom of the forex pile last week. The Dollar took a hit on Wednesday when the World Health Organisation made a statement saying that a COVID-19 vaccine could be ready by the end of the year. On Tuesday, the US inflation figures are due out, the core inflation rate for September is expected to remain at 1.7% YoY and the headline figure should rise from 1.3% to 1.5%. Retails sales are expected to fall MoM for September, from 0.6% to 0.5%. The IMF/World Bank Virtual Annual meeting will take place throughout this week, while it is not expected to move the markets, we might see some hints as to what the Central Bank’s plans are going forward.

Influences on HKD, SGD & AED

This week the SGD will be releasing their GDP growth rate advance for the 3^rd quarter of the year, after declining by 42.9% it is expected to have climbed by 33.3%, showing a significant recovery from the virus. At the same time, the Reserve Bank of Singapore will be making their monetary policy statement. On Friday, September’s balance of trade is expected to check in at SG5.4 B. No data for HKD and AED means that our exotic currencies will be trading in line with the USD.

AUD

The Aussie Dollar started the week on a horrific note after the Reserve Bank of Australia gave their latest monetary policy and Australian government budget report. Thankfully for AUD traders, it was able to recover thanks positive risk sentiment. Labour market data missed expectations last month when it fell from 7.5% to 6.8%, this week experts expect the headline figure to check in at 7.0%. China, Australia’s biggest trading partner, will be releasing their trade data on Tuesday and their consumer and producer prices on Thursday. AUD traders should keep their eyes out for these releases, it is interesting to note that China’s imports seem to be recovering faster than their exports.

NZD

The Kiwi Dollar ended in the red last week following continued speculation of negative interest rates. The positive risk sentiment was not enough to bring the Kiwi Dollar above water despite the COVID restrictions being lifted in Auckland early in the week. The New Zealand general election is expected to be a non-mover on Saturday as PM Jacinda Ardern’s Labour Party hold a wide leader over the National Party. Quarterly CPI numbers are due out on Thursday, it is expected that Q3’s prices are going to rise by 0.7% and annual prices could dip to 1.4%.

EUR

The Euro ended last week in the green after it rallied in the first part of the week thanks to better-than-expected business sentiment data which was enough to stave off negative economic updates and the continued uncertainty surrounding Brexit. The Euro remains resilient despite the European Central Bank’s concerns that it is overvalued. The Euro’s price is expected to be dictated by Brexit updates but there is a host of lower-tier economic data releases that will be sprinkled out throughout the week, the most important probably being the ZEW economic sentiment for the Eurozone and Germany on Tuesday and the core inflation that is due out on Friday.

GBP

Without a major Brexit breakthrough and a light week in terms of data, the Pound had a relatively boring and choppy week. It ended the week as a loser as Brexit uncertainty continues to plague the GBP. The clock continues to tick for the Euro and Pound as the 15 October deadline fast approaches. European Union leaders are set to assess progress on Thursday as UK PM Boris Johnson seems happy to walk away from negotiations if there is no deal by Thursday. The UK is also releasing their labour market numbers on Tuesday, the unemployment rate is expected to rise from 4.1% to 4.2% in August while the claimant count change is likely to come in at 72,000.