Talking Points:

- There are no ‘high’ importance data releases for the US Dollar this week, thus all attention will remain on Washington, D.C. where tax reform legislation is still being hashed out.

- Similarly, there are no ‘high’ importance data releases from the British Pound, Euro, or Swiss Franc in the coming days; the news wire re: Catalan and Brexit may prove to be the biggest risk.

- Retail trader positioning continues to suggest a favorable environment for the US Dollar, particularly against lower yielding currencies.

Join me on Mondays at 7:30 EDT/12:30 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.

11/07 Tuesday | 03:30 GMT | AUD Reserve Bank of Australia Rate Decision

The Reserve Bank of Australia is expected to keep rates unchanged at 1.50% on Tuesday as the country’s growth outlook hasn’t evolved that much in recent weeks. The labor market continues to improve gradually, and it is expected that the unemployment rate will fall further in the coming years. However, with real wage growth continuing to struggle, Australian consumers face some challenges ahead. Accordingly, the RBA is unlikely to want, or need, to change its policy stance in the near future. Rates markets are not pricing in any shift in policy for the remainder of 2017, and the first chance of a move isn’t being given serious consideration until August 2018 at the earlier (51% chance of a rate hike).

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

11/08 Wednesday | 20:00 GMT | NZD Reserve Bank of New Zealand Rate Decision

Once again, the main way the RBNZ has the potential to hit the Kiwi is via commentary on the exchange rate. In the meetings since June, the RBNZ has noted to some extent that “A lower New Zealand dollar would help rebalance the growth outlook towards the tradables sector.” However, the New Zealand Dollar has traded mostly lower over the interim period since the last RBNZ meeting, particularly following the election of Jacinda Ardern as New Zealand PM.

The Q3’17 inflation report remains the most recent set of price data on the economy we have, and showed that will price pressures remain below the RBNZ’s +2% target, they are rising once again (+1.9% from +1.7% (y/y/)). If there is a shift in tone from the RBNZ, it will be an incremental shift in the hawkish direction. Rates markets are not pricing in any shift in policy for the remainder of 2017, and the first chance of a move isn’t being given serious consideration until August 2018 at the earlier (57% chance of a rate hike).

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

11/09 Thursday | 01:30 GMT | CNY Chinese Consumer Price Index (OCT)

Chinese consumer prices rose by +1.6% y/y in September, continuing the inter-year rebound after setting a two-year low in inflation in February (+0.8%). Nevertheless, price pressures remain muted relative to the start of the year, when CPI was +2.5% y/y in January. Now that base metal prices have dropped for the past two months, the Producer Price Index – the cost of inputs at the factory gate, if you will – has started to slip again, due in at +6.6% from +6.9% (y/y). Likewise, headline CPI is due in at +1.7% from +1.6% (y/y). Higher inflation readings out of China usually impact the Australian and New Zealand Dollars under the guise that greater demand and ‘hotter’ economic activity from China will stoke demand for raw materials (like iron ore or milk powder) from the two antipodean countries.

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

Read more: Euro Will Look for Drivers Beyond the Economic Calendar This Week

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

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

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