Summary:

• ECB’s Coeure speech is the sole noteworthy event scheduled for today
• British pound is expected to be the most interesting currency to watch this week
• Australian dollar has to pass a major test to continue rising

The beginning of the new week is clearly positive owing to three reasons standing behind a risk-on mode. Firstly, the hurricane Irma has been downgraded to a category 1 before slamming the West Coast of Florida. Secondly, North Korea did not launch its ballistic missile as it was anticipated by market participants. Finally, the last but not least, Chinese inflation (both CPI and PPI) proved to be by far better than expected which could act in favor of a global reflationary trend.

8:00 am BST – ECB’s Coeure speech: Looking at the macroeconomic calendar for today, there is no many prints to highlight. ECB’s Coeure speech seems to be the sole worth looking at. Having regard to potential preparations for winding down of the QE program any hints might be priceless for markets.

What to watch beyond Monday?

The first week of September was very busy on financial markets. A long awaited ECB meeting has been nearly overshadowed by non-economic developments from North Korea, through Hurricane Irma, through US politics. All in all this resulted in weakness of the US dollar and the highest gold prices in 2017. US dollar will be under the radar again this week because the inflation data is so important for the Fed at that point but it will share some of the spotlight with the pound that will be affected by the BoE meeting and crucial monthly data.

Key events for the GBP – CPI (Tuesday, 9:30am BST), Wage data (Wednesday, 9:30am), Bank of England decision (Thursday, 12:00 pm): Recall how well GBP responded in June when it looked doomed after the Tories lost their majority in early elections that were supposed to extend their grip on power. It gained because all of the sudden the Bank of England started talking about increasing interest rates. This rhetoric has softened since then as the domestic data deteriorated and the reality of tough Brexit talks has settled. However, the CPI remains above the Bank’s target and the data for August will be released ahead of the Bank’s decision that will be announced on Thursday. For now it looks that investors are right in their expectations of no interest rate hike this year but low expectations could leave a room for a positive surprise. Watch out EURGBP as a rally here has been offering signs of exhaustion.

US – Inflation (Thursday, 1:30 pm), Retail Sales (Friday, 1:30 pm): Could it get any worse for the US dollar? That’s the question that investors ask for couple of weeks now and, surprised, they find that the answer has been “yes”. However now, that the 10-year bond yield slipped to a psychological level of 2% the greenback could stage some recovery if Irma turns out not to be as dramatic for Florida as it was for the Caribbean. There is one condition though: US inflation must not disappoint any more. This piece of the data will be absolutely crucial next week and will affect all major pairs with USD as well as gold prices. Consumer seems to be in a good shape so sales data is just an icing on the cake.

AUD – the NFP report in Australia (Thursday, 2:30 am): AUDUSD has just surged to 2-year highs but one needs to keep in mind that this rally has been backed by overall USD weakness and a speculative nature of price gains seen among ferrous metals. Meanwhile the domestic economy has been mixed and the RBA was a bit cautious at its last meeting. Data on employment are among the most watched so traders will certainly react on pairs like AUDUSD but also AUDNZD that’s seen an impressive rally on its own.

Meanwhile, the GBPUSD is moving up towards its this year’s peak. If that level is broken, the pair could eye 1.3450 as its next potential aim. Source: xStation5