Forex Market Outlook For The Week August 03 – 07, 2020

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In the United States, the earnings season continues with approximately a quarter of the S&P 500 companies scheduled to announce their second-quarter results next. On the economic front, the all-important nonfarm payrolls data from the US stands out. The Central Banks in the UK and Australia are also set to announce interest rates. Having said that here is an outlook on a few key economic data releases from around the world:

#1: United States ISM Manufacturing PMI (08/03/2020 Monday 14:00 GMT)

In the United States, the Manufacturing PMI reported by the Institute for Supply Management rose to the 52.6 level in June, recovering sharply from the 43.1 level in May and the 41.5 level in April. The reading for the month, which beat analysts’ expectations of 49.5, pointed towards the strongest increase in factory activity ever since April 2019 after coronavirus pandemic disrupted activities for three straight months. New orders, production, and prices rebounded, while the fall in employment and receipt of new export orders were lower.

Forecast for July 2020: 53.6

#2: Australia Cash Rate (08/04/2020 Tuesday 04:30 GMT)

forex market outlookIn the Monetary Policy Committee Meeting in July, the Reserve Bank of Australia decided to leave the cash rate steady at the record low level of 0.25 percent as analysts widely expected. Policymakers said that the country is going through very difficult times and is witnessing the biggest economic deflation since the 1930s. According to the Committee, nature as well as the speed of economic recovery continued to remain highly uncertain in spite of the signs of improvement. The Central Bank said that it might scale-up bond purchases again if required and do whatever is needed to make sure the bond markets continue to remain functional and achieve the 3-year AGS yield target. Policymakers also added that the accommodative approach taken by the bank will be maintained for the required length of time and the cash rate will not be raised until significant progress is made towards full employment and it is possible to sustain inflation within the 2 to 3 percent target level.

Forecast for August 2020: 0.5 percent

#3: Australia RBA Rate Statement (08/04/2020 Tuesday 04:30 GMT)

The Reserve Bank of Australia releases the Rate Statement on the first Tuesday of every month, excluding January. The Central Bank uses it as a tool for communicating with investors as regards the monetary policy. It provides the outcome of the members’ decisions on interest rates and commentary on the economic conditions that impacted their decision. More importantly, it discusses the nation’s economic outlook and provides clues on future decisions.

#4: New Zealand Employment Change (08/04/2020 Tuesday 22:45 GMT)

In New Zealand, employment increased by 0.7 percent in the March quarter after the reading for the prior period was revised upward to an increase of 0.1 percent.

Forecast for the second quarter of 2020: -2.0 percent

#5: New Zealand Unemployment Rate (08/04/2020 Tuesday 22:45 GMT)

In New Zealand, the unemployment rate increased to the 4.2 percent level in the March quarter from the 4.0 percent level in the prior period. However, the reading for the month came in below analysts’ expectations of the 4.3 percent level. This is the highest unemployment rate ever since the final quarter of 2018 amid the COVID-19 crisis. The jobless rate for men rose to the 4.1 percent level from the 3.8 percent level in the prior quarter. The unemployment rate for women remained unchanged at the 4.3 percent level. Meanwhile, the underutilization rate rose to 10.4 percent from the 11-year low level of 10 percent in the December quarter last year. The labor force participation rate rose to the 70.4 percent level from the 70.1 percent level.

Forecast for the second quarter of 2020: 5.5 percent

#6: United States ISM Non-Manufacturing PMI (08/05/2020 Wednesday 14:00 GMT)

In the United States, the Non-Manufacturing PMI reported by the Institute for Supply Management rose to the 57.1 level in June from the 45.4 level in the prior month. The reading for the month beat analysts’ forecasts that the index will touch the 50.1 level. The reading pointed towards the biggest increase in activity in the services sector since February. It is also the highest single-month jump in percentage-point ever as businesses started reopening after the lockdown. Business activity, new orders, new export orders, and inventories rebounded sharply. Further, employment declined at a lower rate and prices rose faster.

Forecast for July 2020: 55.0

#7: New Zealand Inflation Expectations (08/06/2020 Thursday 03:00 GMT)

In New Zealand, the two-year inflation expectations dropped to the 1.2 percent level in the June quarter of this year from the 1.9 percent level in the prior quarter.

#8: United Kingdom BOE Monetary Policy Report (08/06/2020 Thursday 11:00 GMT)

The Monetary Policy Report provides the Bank of England’s projections with respect to inflation and economic growth during the next 2-year period. The report provides valuable insight into the Central Bank’s view of inflation and economic conditions. These are the key factors that drive monetary policy decisions.

#9: United Kingdom BoE MPC Official Votes and Bank Rate Decision (08/06/2020 Thursday 11:00 GMT)

In the meeting held in June, the members of the Monetary Policy Committee of the Bank of England voted 0-0-9 to keep the bank rate at the record low level of 0.1 percent. This was in line with analysts’ expectations. Policymakers voted 8-1 to raise the stock of the UK government bonds that are financed through the issuance of reserves from the Central Bank by another £100 billion. This takes the total asset purchases to £745 billion. The program is expected to be completed around the beginning of the next year. The Central Bank will also continue with the existing program of purchasing £200 billion UK government bonds and non-financial investment-grade corporate bonds. Further, the policymakers noted that the fall in the economic growth rate of the country and other nations around the world will be much less than anticipated earlier although the outlook remains uncertain. The labor market is expected to take some time to recover.

Forecast for 2020: 0-0-9; 0.10 percent

#10: United Kingdom BoE Monetary Policy Summary (08/06/2020 Thursday 11:00 GMT)

The Bank of England releases the Monetary Policy Summary report on a monthly basis. The Central Bank uses it as a tool for communicating with investors as regards the monetary policy. It provides the outcome of the members’ vote on interest rates and other policy measures. In addition, it offers a commentary on the economic conditions that impacted their votes. More importantly, it discusses the nation’s economic outlook and provides clues on future votes.

#11: United Kingdom BoE Governor Andrew Bailey Speaks (08/06/2020 Thursday 11:30 GMT)

Andrew Bailey, Governor of the Bank of England, is scheduled to hold a press conference in London to discuss the monetary policy statement as well as provide economic forecasts. Markets often experienced volatility during his speeches. This is because traders make an attempt to understand the direction of interest rates.

#12: Australia RBA Monetary Policy Statement (08/07/2020 Friday 01:30 GMT)

The Reserve Bank of Australia releases the Monetary Policy Statement on a quarterly basis. It provides in-depth insights into the central bank’s view of the nation’s economic conditions and inflation, the key factors that are considered when monetary policy decisions are made.

#13: Canada Employment Change (08/07/2020 Friday 12:30 GMT)

In June, Canada added 953,000 jobs after hiring 290,000 workers in May. The figure for the month beat analysts’ expectations that 700,000 jobs would be added. This is the largest increase in employment ever since the start of the series in February 1976 as lockdown restrictions continued to be eased across the country. This allowed more companies to start operations and hire workers. Full-time work increased by 488,000 thousand, while part-time positions rose by 464,000. More people were hired in the services sector, mostly in wholesale and retail trade, accommodation and food services, and social assistance and health care. Employment rose in the goods-producing sector as well in sectors such as construction and manufacturing. All provinces recorded increases in employment. The leading province was Ontario where the easing of restrictions was started in late May.

#14: Canada Unemployment Rate (08/07/2020 Friday 12:30 GMT)

In Canada, the unemployment rate fell to the 12.3 percent level in June after hitting a record high of 13.7 percent in the previous month. Analysts had expected the jobless rate to come in at 12 percent. Many people returned to the job market as the government started easing lockdown restrictions. The labor force participation rate rose to the 63.8 percent level from the 61.4 percent level in the prior month. However, the youth jobless rate fell to the 27.5 percent level in June from the all-time high level of 29.4 percent hit in May.

#15: United States Average Hourly Earnings (08/07/2020 Friday 12:30 GMT)

In the United States, the all-employee average hourly earnings on private nonfarm payrolls declined by 1.2 percent on a month-on-month basis in June after the 1.0 percent decrease recorded in May. Analysts had expected a 0.7 percent decline in average hourly earnings. On a year-on-year basis, the increase in average hourly earnings was 5.0 percent, lower than the downwardly revised 6.6 percent in the previous month. Analysts had expected a 5.3 percent increase in average hourly earnings. The earnings of production and nonsupervisory workers in the private-sector decreased in June. The decreases in earnings reflected gains in jobs among lower-paid workers.

Forecast for July 2020: -0.5 percent

#16: United States Non-Farm Employment Change (08/07/2020 Friday 12:30 GMT)

The US hired 4.8 million workers in June, the highest on record, and beat analysts’ expectations that 3.0 million jobs will be added. This follows the upwardly revised job additions of 2.7 million in May and reflected the partial resumption of economic activity in the country. Economic activity was curtailed because of disruptions caused by the spread of the coronavirus pandemic in the months of March and April. During these two months employment had fallen by as much as 22.2 million. However, the full recovery of the job market is far off. Many economists believe that employment numbers do not reflect the full scale of job losses. This is because many are being continued to be classified as employed though they are absent from work. Additionally, many states are either scaling back or delaying reopening efforts in response to the second wave of coronavirus infections. More people are likely to lose their jobs.

Forecast for July 2020: 1,510,000

#17: United States Unemployment Rate (08/07/2020 Friday 12:30 GMT)

In the United States, the unemployment rate declined to the 11.1 percent level in June from the all-time high of the 14.7 percent level reached in April. The figure for the month also came in below analysts’ expectations of 12.3 percent. Many people came back to the labor market following the easing of restrictions imposed in the wake of the spread of the coronavirus pandemic. The number of unemployed people in the country fell by as much as 3.2 million to 17.8 million, while employment increased by 4.9 million to 142.2 million. Though unemployment has fallen in May and June, the number of unemployed people increased by 12.0 million and the jobless rate rose by 17.6 percentage points ever since February.

Forecast for July 2020: 10.5 percent

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