USD: A few things to have eyes on

This week will be a heavy-hitter for the US dollar. Top-tier data, the Fed interest rate decision, and political noise galore.

Durable goods orders Thursday are expected to show a recovery in June after falling more than expected in May. GDP growth and PCE inflation will keep up busy Friday, but ahead of all this there is the Fed interest rate decision Wednesday.

Policymakers are not expected to depart from current levels, but as the chance of another hike that the Fed has promised is certainly in question amongst investors. Soft data and a lack of pro-growth polices from Washington have made it hard for the Fed to sell their vision of a stronger economy, and we will be watching their tone for any hints that they are scaling back their plans to raise rates and reduce the balance sheet before year-end.

While these are important items to watch, political noise could easily take the forefront for financial markets. The probe into whether Russia meddled in the 2016 election is in our sights as President Trumps’ son-in-law testifies Monday, followed by Trump’s former campaign manager Paul Manafort and his son Trump Jr later in the week.

As noted in our Daily Update, prospects for the dollar looks fairly grim; speculative positions for the USD turned negative last week.

EUR: Shake it off

Euro remains resilient, despite a surprise downturn in the composite Purchasing Managers’ Index in July.

Tuesday we have the German IFO Business Climate Index, which is expected to cool in July after steadily climbing since the beginning of the year and bagging the highest reading since the series began in 1991.

Friday morning will be a busy one. German inflation data alongside growth figures and inflation for France and Spain are due. Inflation in the euro area’s largest economy is expected to decline slightly in July. France’s GDP is expected to hold at 0.5 percent year over year, and analysts are looking for a slight pickup in Spain’s economic growth.

Eurozone business and consumer confidence will also get some attention should they miss the slight decline that economists are expecting.

GBP: Where there’s a will, there may not always be a way

UK Trade Secretary Liam Fox begins a two-day meeting with US Trade Representative Robert Lighthizer in Washington Monday.

President Trump has been a vocal proponent of negotiating a trade deal with post-Brexit Britain. In a speech earlier this month, President Trump promised a “very big, very powerful” trade deal that would benefit both countries. He also said that “we will have that done very very quickly”, but trade experts are skeptical. The President has had a difficult time pushing legislation through Washington, making some skeptical about his ability to stick to aggressive timelines promised during the campaign, but this isn’t the only thing that is causing uncertainty about how quickly a trade deal could be done. The UK cannot officially conduct any trade negotiations until their official break with the European Union in March 2019.

Outside of Brexit and trade headlines, growth figures Wednesday will be a big ticket item to watch. Second quarter growth is expected to decline in the second quarter, from 2 percent to 1.7% year-over-year. This would be the slowest pace of GDP growth since Q2 2016.

Uncertainty brought on by Brexit and negative real wage growth could continue to weigh on the British economy, and we are also watching the Gfk consumer confidence survey Thursday for some insight on the outlook.

AUD: It’s not my fault being the biggest and the strongest 

Australian dollar was the strongest currency Monday morning but why? There hasn’t been anything to really trigger the move aside from broad US dollar weakness and decent moves in China’s FX markets, traders at Citibank note.

Overnight on Wednesday we are watching inflation data for Q2. Inflation is expected to pick up to 2.2% and would confirm a positive outlook for the Australian economy.

Reserve Bank of Australia Governor Philip Lowe will also deliver a speech Wednesday which will be closely watched. While the RBS upgraded their outlook in the most recent meeting, they emphasized that employment and housing data will be closely watched. If Lowe mentions any downside risk in relation to these items, it could be AUD negative.

CAD: Dancing through life

Canadian dollar higher as we start the week with some positive noise from the OPEC meeting.

OPEC and non-OPEC countries are participating in a technical meeting Monday, and so far headlines have been encouraging, which in turn has firmed oil prices. Saudi Arabia will cap crude oil exports at 6.6 million barrels per day next month, almost a million less than a year prior. Saudis said they would also support an extension of the deal to curb oversupply beyond March 2018 if necessary, but on the whole we don’t expect this to come to fruition at this meeting. This could mean that the relief in oil prices could be short-lived.

Other than oil prices, it will be fairly quiet on the data front for Canada until Friday. GDP growth for May is expected to fall exactly in line with the month prior at 0.2 percent month-on-month.

JPY: Risk appetite over risks to inflation

We expect yen to continue tracing broader moves in risk appetite this week as we touch a one-month high against the USD Monday morning.

The minutes from the last Bank of Japan (BoJ) monetary policy meeting will be released early Tuesday. These will paint a fuller picture of the BoJ’s expectations for the economy after they upgraded the growth outlook and downgraded inflation. This makes inflation figures due Friday important to watch.

Retail sales and unemployment will also be watched overnight Friday.