SMATS FX weekly market report | Monday 13 January 2020

USD

The US Dollar somehow benefitted from an increase in tensions between the US and Iran as well as a quick de-escalation last week. The jobs data then dragged the Greenback lower at the end of the week. Investors still see the Dollar as a safe-haven with the joint-highest cash rate (1.75%) in the developed world. Wednesday sees the signing of the first phase of the trade deal between the US and China. Data-wise, the US inflation data for December is due on Tuesday, the consumer price index is likely to rise to 0.2% at the end of the year, this is expected to lift the annualised rate of inflation from 2.1% to 2.3%. US retail sales for December is due out on Thursday with forecasts favouring a strong 0.4% increase for both the headline and core retail figure.

Influences on HKD, SGD & AED

The US-China trade negotiations and global market sentiment are likely to drive the strength of our three exotic currencies in the absence of market-moving data releases. Singapore will be releasing their balance of trade for December on Friday; expectations are that it will decline from SG$3.7B to SG$2.4B.

AUD

The Aussie Dollar is in for a rollercoaster week with China lining up a week of top-tier data releases. Locally however, the Australian housing data is being released on Tuesday, the main figure expected is the housing loans, which is expected to drop to 1.4% in November. Aussie Dollar traders should be keeping a close eye on the Chinese reports being released throughout the week as trade with China makes up most of Australia’s imports and exports.

NZD

No hard-hitting data releases out of New Zealand this week, so the Kiwi Dollar will be looking towards global sentiment and the Chinese data for its movement this week. The single data release out of New Zealand this week comes in the form of their business confidence report as the business NZ manufacturing index is likely to print a 51.4 in November while the NZIER quarterly business confidence is likely to show deterioration for the last 3 quarters when it comes in at -40 for the 3^rd quarter of last year.

China

Tuesday sees the release of the Chinese trade balance during the Asian session, it is likely to show its trade surplus widen to $45.7B in December from the $38.7B we saw in November. Friday sees the release of multiple top tier releases, firstly, the quarterly GDP and fixed asset investment are likely to hold their November figures at 1.5% and 5.2% respectively. Industrial production has been forecast to slow down to 5.8% from 6.2% in the final month of last year. Retail sales is expected to drop by 0.1% to 7.9% for December.

EUR

The Euro zone has several smaller reports sprinkled out throughout the week with the German wholesale price index along with the Italian retail sales due on Monday. Wednesday sees the balance of trade and industrial production figures released for the Euro zone, while Friday brings the current account balance and the final CPI readings. More importantly, dovish remarks coming out of ECB policymakers are expected to drag down the Euro as Lagarde noted that incoming data reports are likely to show muted results. Geopolitical uncertainties remain at the forefront of the news and the market is expected to focus on the return of the US-China trade negotiations throughout this week.

GBP

The United Kingdom have several major data reports set to be released this week, these could give hints as to what the future holds for the Bank of England. Monday sees the release of the balance of trade for November and the GDP 3 month average, the former has been forecast to show a balance of £-3.2 B compared to the £-5.19B seen in October while we expect the GDP figure to come in at 0.0%. On Wednesday the UK will be releasing their inflation reports for December, the core CPI figure is expected to stay at 1.7% year-on-year while the headline figure is also expected to hold steady at 1.5% for December. Finally, on Friday we can expect the retail sales figure to hop up due to season shopping, analysts have forecast a rise of 0.9% after declining by 0.6%.