Forex Market Outlook For The Week August 05 – 09, 2019

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The greenback went through a roller-coaster ride last week when the Federal Reserve announced a rate cut. The Fed lowered the federal funds rate target range to the 2-2.25 percent level during the meeting in July. This is the first rate cut ever since the financial crisis in 2008 as inflation remained subdued amid heightened concerns as regards the nation’s economic outlook and trade tariff tensions with China. Further, the policymakers said that they will act as required to sustain growth. During the press conference, however, Chairman Powell said that he doesn’t consider the move as the beginning of a lengthy rate cut cycle.

The key economic data scheduled for release during the upcoming week include the ISM Non-Manufacturing PMI and producer prices form the U.S.; GDP growth data from the U.K.; and interest rate announcements by the central banks in Australia and New Zealand. Here is an outlook on some of the important releases from around the world:

#1: U.S. ISM Non-Manufacturing PMI (08/05/2019 Monday 14:00 GMT)

In the United States, the Non-Manufacturing PMI reported by the Institute of Supply Management declined to the 55.1 level in June from the 56.9 level in the prior month. The reading for the month came in below analysts’ expectations of 55.9 and pointed to the lowest rate of expansion since July in the non-manufacturing sector. The decline in the Non-Manufacturing PMI was attributed to the slower pace of growth in new orders, business activity, and employment.

Forecast for July 2019: 55.5

#2: New Zealand Employment Change and Unemployment Rate (08/05/2019 Monday 22:45 GMT)

forex market outlookIn New Zealand, employment dropped by 0.2 percent on a quarter-on-quarter basis to 2,658,000 in the March quarter of this year. The reading for the month missed analysts’ expectations for a 0.5 percent growth. On an annual basis, employment increased by 1.5 percent. Meanwhile, the unemployment rate dropped to the 4.2 percent level during the quarter from the 4.3 percent level in the prior period. The jobless rate for the March quarter matched with analysts’ expectations and stayed close to a 10-year low of 4.0 percent hit in the September quarter of last year.

Forecast for the second quarter of 2019: While the employment is expected to increase by 0.3 percent, the jobless rate is likely to edge up to the 4.3 percent level

#3: Australia RBA Rate Statement (08/06/2019 Tuesday 04:30 GMT)

The Reserve Bank of Australia releases the Rate Statement on the first Tuesday of every month, except January. The central bank uses it as a tool to communicate with investors as regards the monetary policy. In addition to containing the outcome of the Monetary Policy Committee’s decision on setting interest rates, it provides a 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: Australia RBA Cash Rate (08/06/2019 Tuesday 04:30 GMT)

In the Monetary Policy Committee meeting held in July, the Reserve Bank of Australia cut down the cash rate by 25 basis points to 1.0 percent, which is a new low-level record, as was widely expected by the analysts. This back-to-back cut in the interest rate for the first time since 2012 was aimed at supporting employment growth and providing confidence that inflation would remain consistent with the target set for the medium term. The policymakers said that they would continue to follow the developments in the labor market and make adjustments to the monetary policy as and when necessary.

Forecast for August 2019: 1.0 percent

#5: New Zealand RBNZ Official Cash Rate (08/07/2019 Wednesday 02:00 GMT)

The Monetary Policy Committee of the Reserve Bank of New Zealand decided to leave the official cash rate (OCR) unchanged at the record low level of 1.5 percent during the meeting held in June, following on the 25 basis points cut announced in the prior meeting, as was widely expected by the analysts. Policymakers noted that the OCR may have to be maintained at a lower level for some time because of the downside risks related to employment outlook and inflation.

Forecast for August 2019: 1.25 percent

#6: New Zealand RBNZ Monetary Policy Statement (08/07/2019 Wednesday 02:00 GMT)

Released on a quarterly basis, the Reserve Bank of New Zealand is mandated to include information as to how the central bank will achieve the inflation targets and how the monetary policy will be formulated and implemented during the next five-year period. The report should also contain details as to how the monetary policy was implemented during the previous period. Traders care because it provides great insight into the central bank’s view of inflation and economic conditions, the key factors that impact the interest rate decisions.

#7: New Zealand RBNZ Rate Statement (08/07/2019 Wednesday 02:00 GMT)

The Reserve Bank of New Zealand releases the Rate Statement eight times in a year. The central bank uses it as a tool to communicate with investors as regards the monetary policy. In addition to providing the outcome of the Monetary Policy Committee members’ decision on setting interest rates, it offers a commentary on the economic conditions that impacted their decision. More importantly, it discusses the nation’s economic outlook and provides clues on future decisions.

#8: New Zealand RBNZ Press Conference (08/07/2019 Wednesday 03:00 GMT)

The Governor of the Reserve Bank of New Zealand holds a press conference one hour after every other interest rate announcement. The press conference lasts for about 30 minutes and has two parts. In the first part, the Governor reads out a prepared statement. In the second part, he answers questions from the press. As the questions might lead to answers that are not scripted, heavy market volatility can be expected during the period.

#9: Australia RBA Governor Philip Lowe Speaks (08/08/2019 Thursday 23:30 GMT)

Philip Lowe, the Governor of the Reserve Bank of Australia is scheduled to testify before the Standing Committee on Economics of the House of Representatives in Canberra. Markets often turn volatile during his speeches as traders make an attempt to understand the direction of interest rates in the future.

#10: Australia RBA Monetary Policy Statement (08/09/2019 Friday 01:30 GMT)

Released on a quarterly basis, the Reserve Bank of Australia’s Rate Statement provides invaluable insight into the central bank’s view on inflation and economic conditions, the key factors that impact the interest rate decisions.

#11: U.K. GDP MOM (08/09/2019 Friday 08:30 GMT)

In the Month of May, the British economy expanded by 0.3 percent after contracting 0.4 percent in the previous month. While the indexes for production, manufacturing, and construction expanded, the indexes for services and agriculture remained unchanged.

Forecast for June 2019: 0.1 percent expansion

#12: U.K. Manufacturing Production (08/09/2019 Friday 08:30 GMT)

In the United Kingdom, manufacturing production rose by 1.4 percent on a monthly basis in May, recovering from the upwardly revised drop of 2.9 percent in the prior month. However, the reading for the month came in below the analysts’ expectations for an increase of 1.5 percent. Manufacturing output rebounded mainly because of an increase in the production of coke and refined petroleum products; chemicals and chemical products; basic metals and metal products; computer, electronics, and optical products; and transport equipment. Output increased in mining and quarrying; electricity, gas, steam, and air conditioning; and water supply sectors as well.

Forecast for June 2019: a decline in manufacturing production to the tune of 0.1 percent is on the cards

#13: U.K. Preliminary GDP QOQ (08/09/2019 Friday 08:30 GMT)

Britain’s quarterly GDP growth was confirmed to be 0.5 percent in the March quarter of this year, which was much above the reading of 0.2 percent for the prior three-month period. Government consumption and investment and household expenditure contributed positively to the quarterly economic growth. However, the contribution from net trade was negative.

Forecast for the June quarter of 2019: GDP growth is expected to remain flat in this quarter

#14: Canada Employment Change and Unemployment Rate (08/09/2019 Friday 12:30 GMT)

Canada lost as many as 2,200 jobs in June after adding 27,700 jobs in the prior month. Analysts had expected that 10,000 workers would be hired in June. Employment declined in Manitoba, Newfoundland, and Labrador. On the other hand, employment rose in Alberta and Saskatchewan provinces. It remained unchanged in other provinces. Employment fell in the manufacturing, natural resources, and other services sectors. While the number of self-employed people in the country dropped by 41,000, the number of employees in public and private sectors remained unchanged. Part-time employment declined by 26,200 and full-time increased by 24,100.

Meanwhile, the unemployment rate increased to the 5.5 percent level in June from the 5.4 percent level in the prior month. The reading for the month was in line with analysts’ expectations.

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