An Important Week for Currency Markets

It’s set to be a very important trading week, starting with UK Construction PMI tonight. Also featuring later in the week will be monetary policy decisions out of the UK, Australia, Europe as well as employment data from Australia, New Zealand, the US and Canada. The ECB meeting on Thursday may be the most highly anticipated, after CPI data confirmed last week that the Euro area’s disinflationary slide was not yet over.

UK PMI’s are to be released over Monday, Tuesday and Wednesday. Economists are expecting a slightly slower expansion in tonight’s Construction PMI, from 62.6 to 62.1, and an improvement in both Manufacturing and Services PMI’s. UK data does not ease up until Friday, with Thursday set for the announcement of the Bank of England’s Bank Rate. As in recent months, the expectation is not yet for a rate rise, however with house prices and CPI inflation ticking up a rate rise before the end of the year is not out of the question.

Tuesday morning will be a big one for the Australian dollar, with the Trade Balance and RBA Rate Statement due throughout the morning. As with many central banks at the moment, the RBA is observing a period of stable interest rates while it assesses the transition from mining investment boom to export boom. Further complicating issues has been strong house price growth, which caused some concerns earlier in the year, as well as the rebalancing of Chinese growth away from investment driven growth – which is typically commodity intensive – towards a consumption and services based economy. The RBA is expected to hold steady for this meeting, and keep the cash rate at 2.50% while waiting for more direction on the economy.

Employment data out of New Zealand is expected to see the Unemployment Rate tick down from 6.0% to 5.8% on Thursday, as the RBNZ shifts from a period of interest rate rises into an expected period of interest rate stability. Should the data meet analysts’ expectations, the unemployment rate would be the lowest it is been since the Global Financial Crisis.

Despite this flurry of news, the ECB meeting on Thursday is likely to be the most closely watched. Economists expected inflation data to begin to put in a floor at 0.5%, however last week hopes of this were dashed slightly with the fall to 0.4%. Traders will be looking for any more specifics on outlined easing measures, as well as hints for any potential new measures in the works.

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