USD: Past its 8-month highs, will heavy data test the dollar’s strength this week?

The US dollar kept its nearly month-long rally going last week after September’s stronger-than-expected existing home sales and optimistic manufacturing forecasts added fuel to the US economy’s perceived strength.

The greenback is starting this week off mostly flat despite October’s preliminary data showing stronger-than-expected manufacturing output so far for the month. Tuesday morning will bring August’s home price data, two of the latest consumer confidence surveys, and another preliminary October manufacturing reading from the Richmond Fed. On Wednesday morning we’ll see the latest business activity readings, as well as September’s goods trade data and new home sales numbers. Thursday will bring the September’s durable goods orders data along with the weekly jobless claims and pending home sales data. Friday morning will end the week with personal expenditures data, consumer sentiment readings, and the coveted, preliminary Q3 GDP growth results. With investors still feeling bullish for the dollar, perhaps only negative surprises from this week’s data could knock the currency off its upward track.

EUR: May need exceptionally strong surprises to overcome the US dollar’s strength

The euro continued its month-long slide against the strengthening US dollar despite the latest Eurozone data showing continued resilience across the region. On top of the European Central Bank’s decision to keep interest rates and stimulus levels steady as expected, the broader Eurozone’s consumer inflation growth and Italy’s trade balance numbers fell in line with analyst forecasts. While Germany’s shrinking producer prices did weigh on the currency, it’s the US dollar’s relative strength that is the real reason why the euro is steadily declining.

The shared currency may be starting a recovery this week, however, as this month’s preliminary manufacturing and business activity showed stronger-than-expected growth out of Italy, Germany, and the broader Eurozone. On Tuesday morning we’ll get France and Germany’s business sentiment readings as well as Italy’s industrial sales results for August. On Wednesday morning we’ll see Germany’s import price data, consumer confidence surveys out of Germany and France, and Italy’s retail sales results for August. Data will be light on Thursday morning with Italy’s consumer/business confidence surveys and wage inflation data, as well as private loan growth readings out of the broader Eurozone. Friday morning will be heavy with consumer/business confidence readings from the broader Eurozone and a slew of producer and consumer inflation data from France, Germany, and Portugal. While the region continues to show resilience, the euro could have a hard time rising against the US dollar unless there are significantly strong surprises to overshadow the relative strength of the US economy.

GBP: Sterling stabilizes as economic fundamentals retake the driver’s seat

The pound stabilized last week as talks around next year’s hard Brexit plans quieted down and as the UK’s economic fundamentals kicked in. The latest housing, retail, consumer, and producer inflation numbers showed faster growth out of the region than analysts had forecast, with consumer prices in particular rising at the fastest pace in two years. The UK labor market also looked healthier as claimant counts fell more than expected in September, while wages grew 2.3% on average over the three-month period that ended in August (above consensus estimates of 2.1%).

Sterling is off to a choppy start this week after the CBI’s industrial trends survey of senior manufacturing executives showed a pessimistic outlook for the UK and as Prime Minister Theresa May’s meeting with UK governments didn’t show any new Brexit plan details. Tuesday won’t showcase any new data, though there will be a speech from Bank of England Governor Carney in the morning. Wednesday morning will bring September’s mortgage application results. Thursday will be busier with the release of preliminary Q3 GDP growth results in the morning and the latest consumer confidence readings out that night to finish off the week’s big data. If next year’s Brexit plans stay off investor minds this week, then strong economic fundamentals out of the UK could help lift the pound out of its post-Brexit vote doldrums.

CAD and AUD: Oil prices to rule CAD this week. Will a bad Aussie jobs report be the start of a downtrend?

The Canadian dollar fell to its lowest levels against the US dollar since March last week due to a combination of flat oil prices, a stronger US dollar, and last Friday’s disappointing retail sales and consumer price results. The northern currency is starting this week off lower as oil prices fell below $50 per barrel. And with no new data out this week, the Canadian dollar could be largely at the mercy of oil prices over the next few days.

It was yet another choppy week for the Australian dollar last week. Stronger-than-expected Q3 GDP, industrial production, and retail sales results out of China (Australia’s largest trading partner) all helped buoy the currency early in the week. But the currency fell sharply after Wednesday night’s disappointing jobs report, which showed employers shedding nearly 10,000 jobs in September (analysts were expecting 15,000 new jobs). The Aussie dollar is rebounding into this week as investors await Tuesday evening’s consumer inflation data. Wednesday night will bring import/export inflation results, while Thursday night’s October home sales results and producer inflation data will finish out the significant data for the week. Investors will be looking to see if last week’s jobless data was an anomaly, or a harbinger of poor results to come out of Australia.