Last week saw some volatile trading take place as we saw the USD retake its crown as the dominant currency after USD bulls overcame stiff resistance. Today see the week start off with three key data releases form the USA, EU and Canada.
We have the Trade data out of Canada, which is of paramount importance to the value of the CAD because the more a country exports, the more demand there will be for its currency so that importers can pay for the goods. Conversely, the more a country imports, the more of the local currency will be supplied so that the imports can be paid for. The Current Account figure, shows the difference between imports and exports and therefore a better than expected release will see the CAD strengthen due to increased demand while a lower than expected result will see the CAD weaken due to an increase in the supply of the currency.
We see the release of the Prelim CPI m/m by Germany, expected at -0.1%, which will show us to what extent the price of goods and services purchased by German consumers have changed. The CPI accounts for most the inflation in an economy and rising inflation implies the economy is heating up while falling inflation implies that the economy is cooling down. Given Germanys status as the EU`s largest member, a better than expected CPI release will imply a heating up of the German economy which will be translated to a heating up of the EU which will result in the EUR strengthening. While a worse than expected release will have the opposite implication and see the EUR weaken.
Finally, we have the CB Consumer Confidence figure out of the US which will indicate the financial confidence of surveyed households in the country. The figure is regarded as a leading indicator of economic health as consumers spending accounts for a large part of the overall economic activity. A better than expected release will see the USD strengthen as markets price in an expected jump in economic activity while a lower than expected release will see the USD weakened as markets price in a potential dip in economic activity.