FX Week Ahead Preview: Is it “End Of Days” For The Greenback

FX Week Ahead, courtesy of Rajan Dhall from fxdaily.co.uk
Coming off the back of another bad week for the USD, we look to a barren period for the data schedule in the US, so markets will have to determine whether to extend this weakness based on the evidence so far.
Friday’s hit on US rates was more a function of the softer retail sales data than the inflation read, where the core year on year was unchanged at 1.7% as forecast. However, with seasonal factors supportive of a pick up in consumer spending in June, there was little improvement on the weak May readings in retail, and USD sellers were back in with force. The greenback ended the week on its lows across the board, but this was tempered to a degree against the JPY and CHF.
Even though the JPY is still seen to be a little undervalued at current levels vs the USD, the consistent BoJ policy to keep the key 10yr JGB rate near/at zero is underpinning the spot rate to a degree, but this also depends on whether the global risk tone can be maintained. Despite the backdrop of tensions over North Korea, as well as the ever present risk of president Trump sparking a trade war (with anyone), equities continue to grind higher with their Teflon (Kevlar) coated armour, so the carry trades will naturally follow. On this note, watch out for the China GDP numbers Sunday night and any material drop from the annualised growth rate of 6.9% from Q1 – Q2 forecast at 6.8% and risk sentiment would easily stomach that.

This post was published at Zero Hedge on Jul 16, 2017.