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FX Markets Look Ahead to Chinese GDP, New Zealand & Canadian CPI

FX Markets Look Ahead to Chinese GDP, New Zealand & Canadian CPI

2017-04-14 19:25:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Talking Points:

- The week ahead is barren for key economic data out of the Euro-Zone, the United Kingdom, and the United States; although, French elections on April 23 are just around the corner.

- Chinese GDP on Monday, New Zealand CPI on Wednesday, and Canadian CPI on Friday are the only ‘high’ rated data releases on the DailyFX Economic Calendar in the week ahead.

- Client positioning has moved considerably over the past week – see recent changes on the IG Client Sentiment data page.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

04/17 Monday | 02:00 GMT | CNY Gross Domestic Product (Q1’17)

The Chinese economy is forecast to have grown by +6.8% on an annualized basis in the first quarter, essentially the same rate of growth seen over the preceding four quarters in 2016 and for the year 2016 overall. Once again, for 2018, the Chinese government is targeting the economy to grow between +6.5% and +7.0%. As the Chinese government guides growth rates lower as the economy matures, it’s important to recognize that the growth readings are the lowest in nearly three decades – since 1990. Chinese growth is currently being fueled by increased government expenditures and an overall trade surplus (as the March figures showed), despite the trade deficit seen in February 2017 (thanks to a calendar quirk around Chinese New Year; February 2012 and February 2014 also produced the only other monthly trade deficits seen ove the past five years).

Pairs to Watch: AUD/JPY, AUD/USD, USD/CNH

04/19 Wednesday | 22:45 GMT | NZD Consumer Prices Index (Q1’17)

Like many other developed countries around the world, New Zealand is expected to show a bump higher in Q1’17 inflation figures, thanks in large part due to the base effect provided by lower oil prices during Q1’16. As a result, we’re looking for the Q1’17 New Zealand CPI figure to come in at +2.0% (y/y), which would only be the second time that CPI ended within the RBNZ’s band over the past two years. With that said, however, the jump in inflation in New Zealand wouldn’t necessarily constitute a material improvement, as the Reserve Bank of New Zealand typically sees energy-borne jumps in price pressures as “temporary.” The headline reading might jazz up the New Zealand Dollar temporarily, but a sustained move is not eyed as the RBNZ continues to talk down its currency and temper expectations of an interest rate hike in 2017.

Pairs to Watch: AUD/NZD, NZD/JPY, NZD/USD

04/21 Friday | 12:30 GMT | CAD Consumer Price Index (MAR)

Canadian inflation is expected to have fallen back below the central bank’s medium-term target of +2.0% in March, as the impact of sustained weaker energy prices continues to hold back the Canadian economy. At the Bank of Canada’s recent policy meeting on April 12, the central bank left rates unchanged at 0.50%, while the report implied little chance of an interest rate hike in 2017. The BOC said that recent factors that have lifted inflation in past months have been only “temporary,” and headline CPI readings could sag once again – in line with core readings which have been “drifting” downwards – over the comings months.

Amid the prospect of inflationary pressures easing back below the BOC’s +2% medium-term goal, overnight index swaps for Canada are only pricing in a 27% chance of a rate hike by year end. Despite recent improvements in the labor market, figures from Statistics Canada showed that wage growth has remained below +2% for 28 consecutive months, and overall wage growth is at its lowest since 1990.

Pairs to Watch: CAD/JPY, USD/CAD

Read more: In Thin Holiday Session, US Dollar Undercut by Weak CPI, Retail Sales

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com.

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX.

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Looking for FX trade ideas now that Q2’17 is underway? Read the DailyFX Trading Guides

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