Trading the News: U.K. Consumer Price Index
A pickup in the U.K.’s Consumer Price Index (CPI) may generate fresh
monthly highs in the GBP/USD as it fuels expectations for a Bank of
England (BoE) rate hike later this year.
What’s Expected:Why Is This Event Important:
The bullish sentiment surrounding the British Pound should gather pace
in the second-half of the year as the BoE looks normalize monetary
policy sooner rather than later, and the fundamental developments coming
out of the region may continue to prop up interest rate expectations as
a growing number of central bank officials adopt a more hawkish tone
for inflation.Expectations for a faster recovery paired with the ongoing improvement
in the labor market may prompt a stronger-than-expected CPI print, and a
marked pickup in the headline reading for inflation may generate a
bullish reaction in the GBP/USD as it boosts interest rate expectations.However, subdued wages along with the slowdown in private sector credit
may drag on consumer prices, and a dismal inflation report may spur a
larger correction in the GBP/USD as it dampens bets of seeing a rate
hike later this year.
How To Trade This Event Risk
Bullish GBP Trade: U.K. Inflation Climbs to 1.6% or Higher
GBPUSD M5 : 38 pips price movement by GBP - CPI news event
U.K. consumer prices slowed to an annualized 1.5% in May from 1.8% the
month prior, while the core rate of inflation narrowed to 1.6% during
the same period after expanding 2.0% in April, which marked the fastest
pace of growth since August 2013. The British Pound struggled to hold
its ground following the weaker-than-expected CPI print, with the
GBP/USD slipping back below the 1.6950 region, but the sterling regained
its footing during the North American trade, with the pair ending the
day at 1.6990.
2014-07-15 12:30 GMT (or 14:30 MQ MT5 time) | [USD - Retail Sales]
if actual > forecast = good for currency (for USD in our case)
[USD - Retail Sales] = Change in the total value of sales at the retail level. It's the primary gauge of consumer spending, which accounts for the majority of overall economic activity
U.S. Retail Sales Inch Higher In June But Core Sales Growth Solid
Retail sales in the U.S. rose by much less than expected in the
month of June, according to a report released by the Commerce Department
on Tuesday, although the report also showed upward revisions to the
sales growth in the two previous months.
The Commerce Department
said retail sales edged up by 0.2 percent in June compared to economist
estimates for an increase of about 0.6 percent.
While the sale
growth came in well below estimates, the report also showed that retail
sales rose by an upwardly revised 0.5 percent and 0.6 percent in May and
The weaker than expected sales growth in
June was partly due to a drop in auto sales, which fell by 0.3 percent
after climbing by 0.8 percent in the previous month.
drop in auto sales, retail sales rose by 0.4 percent in June, matching
the revised increase seen in the previous month. Ex-auto sales had been
expected to increase by 0.5 percent.
The report also showed that
sales by building materials and supplies dealers pulled back by 1.0
percent in June after rising by 0.6 percent in May.
On the other
hand, sales by general merchandise stores jumped by 1.1 percent in June
after edging down by 0.1 percent in the previous month.
Notable sales growth was also shown by health and personal care stores, clothing and accessories stores, and non-store retailers.
watched core retail sales, which exclude autos, gasoline, and building
materials, increased by a solid 0.6 percent in June after inching up by
0.2 percent in May.
Christoph Balz, an economist at Commerzbank,
said, "Don't be misguided by the weak 0.2% increase in U.S. retail sales
in June. The offsetting good news is that sales in April and in May
rose stronger than previously reported."
"Moreover, even the June
figures are more encouraging than they appeared to be at first sight as
sales rose by a solid 0.6% in the core business," he added. "All in all, the steady recovery in the labor market increases consumers' willingness and power to spend."
Commerce Department noted that total retail sales in the month of June
were up by 4.3 percent compared to the same month a year ago.
2014-07-15 14:00 GMT (or 16:00 MQ MT5 time) | [USD - Fed Chair Yellen Testifies]
[USD - Fed Chair Yellen Testifies] = Due to testify on the Semiannual Monetary Policy Report before the Senate Banking Committee, in Washington DC. As head of the central bank, which controls short term interest rates,
she has more influence over the nation's currency value than any other
person. Traders scrutinize her public engagements as they are often used
to drop subtle clues regarding future monetary policy
4 top takeaways from Fed chair Janet Yellen’s testimony to Senate Banking Committee
YELLEN ON POLICY OUTLOOK
“In sum, since the February Monetary Policy Report,
further important progress has been made in restoring the economy to
health and in strengthening the financial system. Yet too many Americans
remain unemployed, inflation remains below our longer-run objective,
and not all of the necessary financial reform initiatives have been
completed. The Federal Reserve remains committed to employing all of its
resources and tools to achieve its macroeconomic objectives and to
foster a stronger and more resilient financial system.”
YELLEN ON LABOR MARKET CONDITIONS
“The FOMC is committed to policies that promote maximum
employment and price stability, consistent with our dual mandate from
the Congress. Given the economic situation that I just described, we
judge that a high degree of monetary policy accommodation remains
Labor force participation appears weaker than one would expect based on
the aging of the population and the level of unemployment. These and
other indications that significant slack remains in labor markets are
corroborated by the continued slow pace of growth in most measures of
YELLEN ON INFLATION
“Consistent with the anticipated further recovery in the
labor market, and given that longer-term inflation expectations appear
to be well anchored, we expect inflation to move back toward our 2%
objective over coming years.”
YELLEN ON ECONOMIC GROWTH
Trading the News: New Zealand Consumer Price Index
Heightening price pressures in New Zealand may push the NZD/USD to fresh
record-highs as it puts increased pressure on the Reserve Bank of New
Zealand (RBNZ) to take a more aggressive approach in normalizing
Why Is This Event Important:
Indeed, RBNZ Governor Glenn Stevens may sound increasingly hawkish at
the July 23 policy meeting as the faster recovery raises the risk for
inflation, and the central bank may do little to halt the ongoing
appreciation in the local currency as it helps to achieve price
Rising input prices along with the pickup in household confidence may
encourage New Zealand firms to pass on higher costs, and a
stronger-than-expected CPI print may heighten the bullish sentiment
surrounding the kiwi as it fuels bets for additional rate hikes in the
second-half of 2014.
Nevertheless, the headline reading for inflation may disappoint amid
subdued wage growth paired with the slowdown in private consumption, and
a dismal inflation print may spark a larger correction in the NZD/USD
as it drags on interest rate expectations.
How To Trade This Event Risk
Bullish NZD Trade: 2Q CPI Climbs 1.8% or Greater
NZ Dollar Falls on CPI Miss, Aussie Dollar Down After China GDP Data
The New Zealand Dollar
underperformed in overnight trade, sliding as much as 0.7 percent on
average against its leading counterparts. The move followed
figures for the second quarter. The baseline year-on-year inflation
rate registered at 1.6 percent, falling short of consensus forecasts
calling for a 1.8 percent result. That seemingly undermined RBNZ rate
hike expectations, with the slide in the Kiwi tracking a parallel move lower in the New Zealand’s benchmark 10-year bond yield.
The Australian Dollar likewise traded lower, losing as much as 0.24 percent against the majors. Curiously, the move followed an upbeat set of Chinese GDP
figures. Output grew 2.0 percent in the second quarter, topping bets
calling for a 1.8 percent increase. Supportive Chinese data might have
been expected to boost the Aussie considering the East Asian giant is
Australia’s top trading partner, meaning firming performance there bodes
for the latter country’s pivotal export sector.
The newswires chalked up this apparent disparity to
concerns that the Chinese economy’s recovery was unsustainable,
suggesting seemingly sharp credit expansion rather than hard growth is
behind the rosy headline GDP reading. Fading stimulus expansion bets
were likewise cited, with investors apparently worried that the
second-quarter data set will discourage further expansionary policy.
Needless to say, it is all but impossible to tell with absolute
certainty why the markets were unimpressed and the Aussie fell. In any
case, we remain short AUDUSD.
June’s UK Jobless Claims
figures headline the economic calendar in European hours. Expectations
call for a 27,000 drop in new applications for unemployment benefits,
which would mark the smallest drawdown in 13 months. Absent a dramatic
deviation from expectations, the outcome may pass with little fanfare
considering its relatively limited implications for BOE monetary policy
bets and thereby for the British Pound. Meanwhile, technical positioning warns GBPUSD may be carving out a top below the 1.72 figure.
The spotlight then shifts to US policy concerns as Fed Chair Janet Yellen
testifies before Congress for a second day, this time appearing before
the House of Representatives having talked to the Senate yesterday. The
central bank chief’s prepared remarks are likely to sound familiar and
offer little impetus for volatility. The Q&A session that follows
might produce some fireworks if lawmakers manage to squeeze out anything
about the likely timing of interest rate hikes however, prompting a
response from the US Dollar.
Consumer Prices Index (QoQ) (2Q)
Westpac Leading Index (MoM) (JUN)
GDP (QoQ) (2Q)
GDP (YoY) (2Q)
GDP YTD (YoY) (2Q)
Retail Sales (YoY) (JUN)
Retail Sales YTD (YoY) (JUN)
Industrial Production (YoY) (JUN)
Industrial Production YTD (YoY) (JUN)
Fixed Assets Ex Rural YTD (YoY) (JUN)
Jobless Claims Change (JUN)
Claimant Count Rate (JUN)
ILO Unemployment Rate (3Mths) (MAY)
Employment Change (3M/3M) (MAY)
Avg Weekly Earnings (3M/(YoY) (MAY)
Weekly Earnings ex Bonus (3M/(YoY) (MAY)
Euro-Zone Trade Balance (€) (MAY)
Euro-Zone Trade Balance s.a. (€) (MAY)
ZEW Survey (Expectations) (JUL)
Trading Currencies with Sunil Mangwani
Every trader has to start somewhere! Sunil Mangwani shares, with Merlin,
his rocky road from book learning, to understanding the fundamentals of
Supply and Demand. Sunil also takes a look into how commodities
influence currency action and can be used as an odds enhancer. The duo
also look at a variety of yen pairs including AUDUSD, USDJPY and GBPJPY.
2014-07-17 09:00 GMT (or 11:00 MQ MT5 time) | [EUR - CPI]
if actual > forecast = good for currency (for EUR in our case)
[EUR - CPI] = Change in the price of goods and services purchased by consumers, excluding food, energy, alcohol, and tobacco.
Eurozone June Inflation Stable At 0.5%
Eurozone inflation held steady at 0.5 percent as initially estimated in June, final data from Eurostat showed Thursday.
Month-on-month, prices gained only 0.1 percent.
Headline inflation continues to remain below the European Central Bank's target of 'below, but close to 2 percent'.
inflation that excludes energy, food, alcohol and tobacco, rose
marginally to 0.8 percent in June from 0.7 percent in May. The final
figure matched the flash estimate released on June 30.
services and energy advanced 1.3 percent and 0.1 percent, respectively.
Meanwhile, food, alcohol and tobacco prices dropped 0.2 percent and
non-energy industrial goods prices were down 0.1 percent.
Inflation in European Union was 0.7 percent, up from 0.6 percent in May.
Trading Video: EURUSD Back to 1.3500, Dow Closes at a Record High
Despite a mix of data that offered a distinct favor for the sterling,
GBPUSD failed to overtake 1.7200. Meanwhile, a more mixed picture for
EURUSD wouldn't keep it from pulling into 1.3500. Both majors are at key
technical levels that no doubt have FX traders projecting serious trend
developments, but the analysis isn't adding up favorably. Scheduled
event risk, underlying fundamental themes, general volatility conditions
are not solidifying into the same mold that technicals alone seem to
take. With a number of great looking technical opportunities on hand, we
discuss the bigger picture for these trade setups in today's Trading
2014-07-17 12:30 GMT (or 14:30 MQ MT5 time) | [USD - Building Permits]
[USD - Building Permits] = Annualized number of new residential building permits issued during the previous month. It's an excellent gauge of future construction activity because
obtaining a permit is among the first steps in constructing a new
U.S. Housing Starts Unexpectedly Show Sharp Drop In June
New residential construction in the U.S. unexpectedly showed a steep
drop in the month of June, the Commerce Department revealed in a report
on Thursday, with housing starts falling to a nine-month low.
Commerce Department said housing starts tumbled 9.3 percent to an
annual rate of 893,000 in June from the revised May estimate of 985,000.
sharp drop came as a surprise to economists, who had expected housing
starts to climb to 1.020 million from the 1.001 million originally
reported for the previous month.
Building permits, an indicator
future housing demand, also fell 4.2 percent to an annual rate of
963,000 in June from the revised May rate of 1.005 million.
Trading the News: Canada Consumer Price Index (CPI)
Even though BoC Governor Stephen Poloz talked down the risk for
inflation, sticky prices in Canada may continue to prop up interest rate
expectations as the central bank adopts a more balanced view for the
The pickup in private sector consumption may encourage faster price
growth in Canada as the BoC looks to achieve a ‘soft landing’ in the
housing market, and a stronger-than-expected CPI print may spur a more
material shift in the policy outlook as the central bank softens its
How To Trade This Event Risk
The headline reading for Canada inflation climbed to an annualized 2.3%
in May to mark the fastest pace of growth since February 2011, while the
core CPI increased 1.7% during the same period amid forecasts for a
1.5% print. The stronger-than-expected prints spurred a bullish reaction
in the Canadian dollar, with the USD/CAD slipping below the 1.0800
handle, and the pair traded lower throughout the North American trade as
the pair ended the day at 1.0751.
MetaTrader Trading Platform Screenshots
USDCAD, M5, 2014.07.18
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USDCAD M5 : 46 pips price movement by CAD - CPI news event