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Central banks on deck this week

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Central banks on deck this week

Currency markets will focus on a deluge of data points during the coming week which include 3 major central bank interest rate decisions, manufacturing data for the month of July and the US employment report which will likely drive currency flows during most of August.

On Monday, Japan started off the data flow reporting softer than expected retail sales.  The report which showed that consumer purchases declined 0.2% compared to expectations of a 0.8% rise after a 1.5% gain in May.  Despite the weaker than expected number, second quarter retail sales was the strongest in the past 24-months. This comes on the heels of last week’s stronger than expected headline inflation report which was one of the strongest seen since 2008.  The retail sales report was more in line with the core inflation report which showed a continued contraction.

Mid-week investors will need to absorb a number of central bank statements from the FOMC, ECB and the BoE.  There is unlikely to be any movement by any of these institutions, but that does not rule out statements that reflect both dovish and hawkish tones from the major developed central banks. Speculation around the tapering of the Federal Reserve bond purchase program which began in late May and continued through June will drive capital markets flow.

At end of the week, the US will release the jobs report.  Expectations are for a release of approximately 200K which is the current 3-month average.  Jobless claims fell slightly during the month but not enough to forecast any significant change to the jobs number.  The unemployment rate is forecast to remain near 7.6%, as long as the participation rate remains steady.

Sterling has been one of the best performing currencies against the greenback.  Momentum is strong with the MACD printing in positive territory with a strong trajectory.  Support is seen near the 10-day moving average near 1.53, which resistance is seen near the recent highs at 1.5425.

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