Maybank FX Tech Weekly - 3 Aug 2015

Please see our Maybank FX Tech Weekly. Charts can be viewed in the PDF attached.

       For this week, FX market is expected to take cues from the slew of global PMIs (Mon, Wed); central banks meetings in particular, the BoE on Thu and US Jul payrolls report (Fri). On US payrolls, consensus is looking for +225k print for NFP (vs. +223K in Jun); +0.2% m/m (vs. 0% in Jun) for average hourly earnings and unemployment rate at 5.3% (vs. 5.3% in Jun).

       With monetary policy divergence a key FX play, we continue to favor currencies possibly shifting towards a tightening bias (i.e. USD and GBP) vs those on unconventional easing (i.e. EUR and JPY). On commodity-bloc currencies, we are cautious of shorts-squeeze but remain better sellers on rally. Despite most USD/AXJs (i.e. USDMYR, USDIDR) already at fresh multi-year highs, we still see further upside especially those with falling FX reserves (MY, ID, PH release FX reserves data this Fri) amid Fed tightening in due course. With many key US data release for this week, there is a risk for USD near-term pullback on any US data disappointment. We remain better buyers on dips. We expect a pick-up in cross-asset volatility given the intensity of data release from mid-week onwards.

       On central bank meetings this week – RBA, RBI meet Tue, BoT meets Wed, BoE meets Thu and BoJ meet Fri. We expect all 5 central banks to keep policy rate on hold. Big focus on BoE this Thu – as BoE MPC meets, and will publish its Minutes on the same day as well as release its Quarterly Inflation Report – all in one go!  We have previously noted that BoE Carney and Miles (dove; last MPC meeting) recently adopted a slight tinge of hawkish tone in their recent speeches. We see risks of BoE members Weale and McCafferty (both hawks) to inch towards voting for a rate hike in coming MPC meeting (previous few MPC meetings saw members voting 9-0 to keep rate unchanged). Expectation appears to run high for hawkish take on MPC voting and inflation outlook could keep the GBP supported but we continue to be cautious, for any disappointment to expectation will expose GBP to the downside.

       Moving on into the weekend and beyond, China kicks off its monthly data releases on 8 Aug with Jul trade data (Cons. 363.2bn); Jul CPI (Cons. 1.6%) and PPI (Cons. -5%) inflation on 9 Aug before activity data - Jul retail sales (Cons. 10.6%), industrial production (Cons. 6.6% y/y), FAI (Cons. 11.5%) on 12 Aug. We expect activity data to be muted, consistent with the moderation in recent PMIs. Jul new CNY loans, M2 and TSF data will be released sometime between 10 and 15 Aug.

       Next week key focus for G7 on Fed Lockhart’s speech (10 Aug); EC, GE Aug ZEW survey (11 Aug); UK Jun labor data (12 Aug); ECB Minutes (13 Aug); EC, GE, FR 2Q GDP and EC Jul CPI (14 Aug). For AXJs, Malaysia is due to release Jun industrial production and manufacturing sales data (10 Aug); 2Q GDP and current account (13 Aug). Any decline on growth/activity data will further dampen sentiment and weigh on the MYR. On the same day, BSP meets – we expect no change to policy rate.