The second quarter couldn’t have ended better for pound and euro bulls. The ECB’s conference in Portugal brought a hawkish shift in the global central banking, which led to a surge in the euro and sterling. Both Draghi and Carney struck an upbeat tone in their speeches, and BOE’s governor even said that a rate hike could be appropriate soon. What’s more, inflation data from the EMU showed that the slowdown from last month was a temporary pullback, which could allow the central bank to go on further with its hawkish communication. In the upcoming week, however, the main focus will be on the US dollar, but there’s no doubt that traders will closely follow developments in the European and UK economies. With crucial economic reports, central banks’ minutes and RBA’s meeting in sight, one should expect a frantic start of the third quarter.
US data – ISM manufacturing (Monday, 3:00 pm BST), Non-Manufacturing ISM (Thursday, 3:00 pm BST), ADP (Thursday, 1:15 pm BST), NFP (Friday, 1:30 pm BST)
The Federal Reserve took quite a brave move when it raised interest rates for the second time this year in its June meeting. The hike came despite a weakening of the US data that pushed the Citi economic surprise index to the lowest level since mid-2011. The central bank, however, justified the weakening of data and said that it was mainly due to temporary factors. If so, then the upcoming reports should show that the Fed was correct and that the tightening cycle could continue in the second part of the year. If so, then watch the USDJPY pair that made an important breakout last week.
Central banks – RBA meeting (Tuesday, 5:30 am BST), FOMC minutes (Wednesday, 7:00 pm BST), ECB minutes (Thursday, 12:30 pm BST).
A hawkish shift in central banks’ approach was seen last week, which led to important moves in both EURUSD and GBPUSD. While Mark Carney’s speech was a straightforward one, Mario Draghi’s message was somewhat cryptic. This week a more important message could come. The ECB’s minutes from June’s meeting could reveal whether a monetary policy shift in the EMU is just behind the corner. As for the FOMC minutes, it’s a rather second tier publication for the USD this week because of Yellen’s press conference that took place after the last FOMC meeting. And finally, the RBA meeting could be also an important milestone for the AUD. The currency was the second strongest last week, and if the RBA joins the hawkish choir, AUDUSD could to add to recent gains.
UK data – Manufacturing PMI (Monday, 9:30 am BST), Services PMI (Wednesday, 9:30 am BST), Industrial Production (Friday, 9:30 am BST)
As previously mentioned, the pound benefited from a hawkish speech from Mark Carney. If the economic data comes better than expected, a rate hike this year will become likely, which could have a significant impact on the British Pound. That is why a break above 1.30 on the GBPUSD could be on the cards over the coming days.
USDJPY is already in an upward trend on H1 interval and it could be a winner should US data improve. The check will start today with the ISM but the key reports will arrive on Thursday (ADP) and Friday (NFP).