• US CPI
  • China Trade data

The macroeconomic data releases in the FX market week ahead is relatively quiet. We see trade data for China, UK GDP and US CPI data releases are in focus. In addition to these, Trade war concerns, ongoing Italy budget headlines, rising Crude Oil prices and surging Bond yield are the key drivers.

In the past week, AUD and NZD were the weakest among G10 block with 2.85% and 2.50% respectively, followed by SEK and NOK 2.00% and 1.50% respectively against the USD.

Week ahead:

  • In Europe, lack of market movers for the single currency remains to focus on Italy assets and the U.S bond yields. Events wise, we will get the ECB minutes on Thursday. So far, EURUSD remains capped between 1.1590-1.1625, we favor sell on the rise strategy.

The next focal point for markets is 15 October, when we will get more details on the budget and the government will have to submit it to the EU, who will then have to respond by 30 November, said by Thomas Harr, Ph.D., Global Head of FI&C Research, reported by Deutsche Bank.

  • Turning to the UK, Brexit headlines renewed the buying the buying interest for GBP last week. Our upward bias for GBPAUD remains on the screen.

Data wise, we will see GDP and August manufacturing (Wed).  We expect UK GDP to have expanded 0.1% in August, down from 0.3% in July. According to ONS, the month-on-month gross domestic product (GDP) growth rate was 0.3% in May 2018, 0.1% in June and 0.3% in July.

In the past three months up to July, the growth in the economy picked up. Forecasting this week’s GDP figures, Danske Bank said in a note to clients “We estimate GDP grew 0.2% m/m in August”.

  • In the U.S, data-wise we will see CPI data for September (Thu). We expect the CPI to rise 0.2% m/m basis. With the limited data releases, market participants remain to focus on the geopolitical concerns with ongoing Trade war risk especially US-China and rising bond yields which lead to the global equity indices sell-off.

The benchmark U.S 10-year Treasury yield posted a double bottom and gave a bullish breakout through the range, aiming above 4.00% in the coming weeks. Recent Fed hawkish talks and the strong macroeconomic data is supporting the yield rally. Based on this fact we expect a new leg higher in USDJPY and USDCHF if the price break through the strong resistance zone. We also expect the dollar to continue its strength against the Antipodeans.

Chart of the week: GBPUSD

As long as 1.3000 is support look for 1.3200 and 1.3300.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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