Forex Market Outlook For The Week August 10 – 14, 2020

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In the upcoming week, the key economic data scheduled to be released are the interest rate announcement from New Zealand, second-quarter GDP data from the UK, CPI and retail sales figures from the US, and employment data from Australia. Having said that here is an outlook on some of the important announcements:

#1: New Zealand Official Cash Rate (08/12/2020 Wednesday 02:00 GMT)

In the meeting held in June, the Reserve Bank of New Zealand decided to leave the official cash rate (OCR) unchanged at the record low level of 0.25 percent as analysts widely expected. However, the central bank maintained the level of its large scale asset purchase program at NZ$60 billion. According to policymakers, the balance of the economic risks remained to the downside in spite of the relaxation of lockdown measures and the earlier resumption of economic activity in the country amid the COVID-19 crisis. Further, the central bank noted that it is well prepared for providing additional stimulus, expanding the large scale asset purchase program, and employing more monetary policy measures as needed. The RBNZ board also agreed that the extent of the job losses and the reduction in activity continued to remain uncertain. Further, the RBNZ noted that business and household confidence remained weak.

Forecast for August 2020: 0.25 percent

#2: New Zealand RBNZ Monetary Policy Statement (08/12/2020 Wednesday 02:00 GMT)

forex market outlookReleased on a quarterly basis, the Monetary Policy Statement from the Reserve Bank of New Zealand provides details as to how the central bank will achieve its inflation targets, how it proposes to formulate as well as implement the monetary policy over the next five-year period, and how the monetary policy has been implemented ever since the release of the last statement. The statement provides traders with valuable insight into the central bank’s view of inflation and economic conditions, the key factors that shape the monetary policy and impact interest rate decisions.

#3: New Zealand RBNZ Rate Statement (08/12/2020 Wednesday 02:00 GMT)

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

#4: New Zealand RBNZ Press Conference (08/12/2020 Wednesday 04:00 GMT)

The Governor of the Reserve Bank of New Zealand holds a press conference two hours after every other Official Cash Rate announcement. The press conference lasts for about 30 minutes and has two parts. In the first part, he reads out a prepared statement. In the second part, he answers questions posed by the press. As the questions can lead to unscripted answers, heavy market volatility can be expected.

The RBNZ uses the press conference as a tool to communicate with investors as regards the monetary policy. In the press conference, the Governor covers in detail the factors that impacted the most recent rate decision. More importantly, it offers clues on future monetary policy decisions.

#5: United Kingdom Preliminary GDP (08/12/2020 Wednesday 06:00 GMT)

The GDP of the United Kingdom shrank 2.2 percent in the March quarter of this year compared to the preliminary estimate of 2.0 percent, recording the largest decline ever since the September quarter of 1979. Lockdown imposed to control the spread of Covid-19 from mid-March and closure of non-essential businesses impacted economic growth. Household consumption fell by the most in more than four decades, driven by the decline in spending on restaurants and hotels, transport, and clothing and footwear because of social distancing measures. Fixed investment shrank because of a decline in government investments and dwellings and business investment. Government consumption dropped due to a reduction in expenditure in the health and education sectors. The net trade’s negative contribution was revised downwards as both imports and exports tumbled more than initially expected.

Forecast for the second quarter of 2020: -20.5 percent

#6: United States CPI (08/12/2020 Wednesday 12:30 GMT)

In the United States, consumer prices increased 0.6 percent on a month-on-month basis in June, beating analysts’ expectations for a 0.5 percent increase. Consumer prices increased for the first time in four months at the strongest level ever since August 2012 as the relaxation of lockdown measures started. Energy prices rose for the first time in 2020, boosted by the 12.3 percent rebound in gasoline prices. Food prices also advanced at a higher rate.

Forecast for July 2020: 0.3 percent

#7: United States Core CPI (08/12/2020 Wednesday 12:30 GMT)

In the United States, core consumer prices, excluding the prices of volatile items like food and energy, rose by 0.2 percent on a month-on-month basis in June. This is the first monthly increase in as many as four months. The reading for the month came in slightly above analysts’ expectations for a 0.1 percent increase as the U.S. reopened after the coronavirus-induced lockdown. After recent declines, motor vehicle insurance costs rose sharply in June. Additionally, apparel, medical care, and shelter prices increased. On the other hand, the indexes for used trucks and cars, communication, and recreation declined.

Forecast for July 2020: 0.2 percent

#8: Australia Employment Change (08/13/2020 Thursday 01:30 GMT)

In Australia, employment rose by 210,800 in June to 12,328,500. The reading for the month beat analysts’ expectations for a gain of 112,000. Part-time employment increased by 249,000, but full-time employment declined by 38,100.

Forecast for July 2020: 30,000

#9: Australia Unemployment Rate (08/13/2020 Thursday 01:30 GMT)

On a seasonally adjusted basis, Australia’s unemployment rate rose to the 7.4 percent level in June from the 7.1 percent level in May. The increase in employment was in line with analysts’ expectations. This was by far the highest unemployment rate ever since November 1998 as health measures implemented to contain the spread of COVID-19 significantly impacted the nation’s economic activities and operation of the labor market. The number of jobless people in Australia rose by 69,300 to the all-time high level of 992,300. While the number of people looking for full-time work increased by 38,000 to 731,600, those looking for part-time work increased by 31,300 to 260,700. The participation rate increased to a three-month high level of 64 percent, while analysts expected the reading to come in at 63.6 percent.
Forecast for 2020: 7.8 percent

#10: Australia RBA Governor Philip Lowe Speaks (08/13/2020 Thursday 23:30 GMT)

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

#11: United States Core Retail Sales (08/14/2020 Friday 12:30 GMT)

In the United States, retail trade excluding autos (core retail sales) rose by 7.3 percent on a month-over-month basis in June, beating analysts’ expectations for a gain of 5.0 percent.

#12: United States Retail Sales (08/14/2020 Friday 12:30 GMT)

In the United States, retail trade surged 7.5 percent on a month-over-month basis in June after the reading for the prior month was revised upward to an increase of 18.2 percent in May. The reading for the month beat analysts’ expectations for a gain of 5.0 percent as more businesses started operating and domestic trade continued to recover from the slump in April. The biggest increase in sales was reported by businesses such as clothing stores; electronics and appliances; furniture; sporting goods, music, and books; drinking places and food services; miscellaneous; and gasoline stations. Motor vehicle dealers; personal and health care stores; and general merchandise stores also reported higher sales. On the other hand, sales declined for non-store retailers; food and beverage stores; and gardening equipment and building material stores.

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