A traders week ahead playbook - the USD rally getting legs

14 мая 2023 г.

China industrial production (16 May 12:00 AEST) – the market expects a solid improvement in the industrial production read at 10.8%. We also get retail sales (+22%), and fixed asset investment (5.7%) – a big year-on-year improvement shouldn’t surprise given it is measured against a stagnant economy that was in lockdown. However, with China’s data throwing up a few concerns of late (we’ve seen poor import, PPI, and loan data) China’s growth is very much at the heart of market moves. USDCNH seems key to G10 FX pricing, and a further rise towards 7.0000 should weigh on EURUSD and AUDUSD.

Japan national CPI (19 May 09:30 AEST) – a data point that flies under the radar, but this print could be very important for Japan govt bond (JGB) and JPY pricing. With expectations of a change in BoJ (Bank of Japan) policy recently pushed back to the July/September BoJ meetings (there is no August BoJ meeting), a hot CPI print could see views of a tweak to policy pushed forward. The market expects headline CPI at 3.5% (from 3.2%) and core at 4.2% (3.8%). The core print is concerning given the extent of the recent rise and if it does indeed come in at 4.2% it would be the highest since Aug 1982. The JPY should be on the radar here and a print into 4.4% could see JPY shorts cover.

US retail sales – the market will be watching ongoing US debt ceiling negotiations and the tape in the regional banks, but US retail sales could potentially impact pricing – the market expects a 0.8% lift in sales in April. With just 3bp of hikes priced for the June FOMC, we’d need to see a punchy number (well above 1%) to move the USD on this release. USDJPY is the cleanest play on this data, with the risk skewed for a move back to key resistance at 137.69.

UK employment report (16 May 16:00 AEST / 07:00 BST) – the market looks for 5.8% earnings growth (from 5.9%), with the U/E rate unchanged at 3.8%. The market prices 20bp of hikes for the 22 June BOE meeting, and a peak (terminal) bank rate of 4.87%, so the employment report could impact the GBP. GBPUSD trades heavy, with 1.2344 as the big support target. EURGBP saw a bullish outside day on Thursday and I like buy stop orders above 0.8734 for 0.8760/70.

Aus Q1 wage price index (17 May – 11:30 AEST) – the market is looking for 3.6% YoY wage growth (0.9% QoQ), with the range of estimates set from 3.8% to 3.5%. With just 1bp of hikes (a 4% chance) priced for the June RBA meeting, a blowout wage print could lift very sanguine rates pricing. Probably good for a small lift in the AUD, but the bigger driver remains concerns around global growth, so China’s data dump is likely more important for the AUD this week.

Aus April employment report (18 May – 11:30 AEST) – the consensus is calling for 25k net jobs created, with the U/E rate unchanged at 3.5% and the participation rate at 66.7%. Unlikely a volatility event for the AUD, or at least one where any initial move is likely quickly faded.

Canada CPI (16 May 22:30 AEST) – the market expects headline CPI at 4.2% YoY (from 4.3%) and core at 4.3% (from 4.6%). The market sees the Bank of Canada (BoC) on pause through 2023, with cuts priced in January 2024 – the risk is we see a downside surprise opening cuts in Q3 23. Upside risks in USDCAD remain for a re-test of 1.3667.


Fed speakers – it’s a massive week of Fed speakers and it could get noisy, although I suspect they will all say a similar thing; that inflation is still too high, and that interest rates may need to go up further, although they will need to assess the lag effect of policy tightening. Chair Powell speaks with Ben Bernanke (20 May at 01:00 AEST) and that could be worth a listen.


ECB speakers – we see 12 ECB speeches this coming week