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

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Last week, the greenback traded mixed results against major currencies around the world. A reduction in risk appetite across markets helped the US dollar rally against sentiment- and cycle-sensitive currencies. However, the greenback lost ground against the Euro, Japanese Yen, Swiss Franc, and British Pound.

The upcoming week will be very busy with a slew of data scheduled to be released from the United States including January’s job report and PMI surveys reported by the ISM. China’s markets are expected to open on Monday following the extended Lunar New Year closure after the outbreak of the coronavirus. Further, the Australian central bank’s interest rate announcement and China Caixin PMI data are also expected. Here is an outlook on a few important releases:

#1: China Caixin Manufacturing PMI (02/03/2020 Monday 01:45 GMT)

forex market outlookIn China, the Caixin General Manufacturing PMI dropped to the 51.5 level in December 2019 from the 51.8 level in the prior month. Analysts had expected the reading for the month to remain unchanged. The pace of new orders growth slowed to a three-month low amid a marginal increase in exports. The output expansion, however, remained strong. For the sixth straight month, purchasing activity increased though the growth rate slowed down from November. Employment growth remained unchanged as many firms took action to boost efficiency and contain costs. This led to an improvement in the level of outstanding businesses although at a slower rate. Operating expenses increased marginally for the fourth straight month and reinforced a renewed rise in selling prices. Looking forward, sentiment continued to remain weaker than the historical levels because of concerns related to ongoing trade tensions, intense market competition, and environmental protection policies.

Forecast for January 2020: 51.0

#2: United States ISM Manufacturing PMI (02/03/2020 Monday 15:00 GMT)

In the United States, the ISM Manufacturing PMI dropped to the 47.2 level in December 2019, the lowest level ever since June 2009, from the 48.1 level in November 2019. The reading for the month came in well below analysts’ expectations of the 49.0 level and pointed to a fall in manufacturing activity for the fifth month in a row. New orders, production, new export orders, and employment declined at a faster pace with an increase in price pressures. Global trade continued to remain the most important cross-industry issue. However, there were indications that several industrial sectors will improve because of the phase-one trade agreement signed by China and the U.S.

Forecast for January 2020: 48.5

#3: Australia Cash Rate (02/04/2020 Tuesday 03:30 GMT)

In the meeting of the Monetary Policy Committee of the Reserve Bank of Australia held in December 2019, the central bank decided to leave the cash rate steady at the record low level of 0.75 percent. Policymakers assessed the impact of the three interest rate cuts already announced last year and added that the labor market will be monitored continuously. They also pointed out that it was reasonable to anticipate lower interest rates for an extended period of time because of both domestic and global factors. Further, policymakers said that they are prepared to ease monetary policy measures if it is required to support growth.

Forecast for January 2020: 0.75 percent

#4: Australia RBA Rate Statement (02/04/2020 Tuesday 03:30 GMT)

The Reserve Bank of Australia releases the Rate Statement on the first Tuesday of every month, except in January. The Reserve Bank Board uses it as a tool for communicating with investors as regards the monetary policy. It provides the outcome of their discussion on setting interest rates and commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and clues on future decisions.

#5: New Zealand Employment Change (02/04/2020 Tuesday 21:45 GMT)

In New Zealand, employment rose by 0.20 percent on a quarter-on-quarter basis in the September quarter of last year, following the 0.80 percent increase in the previous quarter. Analysts had expected employment to increase by 0.30 percent.

Forecast for the fourth quarter of 2019: 0.3 percent

#6: New Zealand Unemployment Rate (02/04/2020 Tuesday 21:45 GMT)

On a seasonally adjusted basis, the unemployment rate increased to the 4.2 percent level in the third quarter of 2019, up 0.3 percent from the 3.9 percent level in the prior quarter. While the jobless rate for men increased to 3.8 percent from 3.6 percent, the jobless rate for women increased to 4.6 percent from 4.3 percent in the previous quarter. The number of jobless people increased 6,000 and reached 115,000 in the third quarter of 2019.

Forecast for the fourth quarter of 2019: 4.2 percent

#7: Australia RBA Governor Philip Lowe Speaks (02/05/2020 Wednesday 01:30 GMT)

Philip Lowe, Governor of the Reserve Bank of Australia, is scheduled to deliver a speech on the topic “The Year Ahead” in Sydney at the National Press Club. Questions from the audience expected. Markets often turn volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates.

#8: Euro Area ECB President Christine Lagarde Speaks (02/05/2020 Wednesday 12:15 GMT)

Christine Lagarde, President of the European Central Bank, is scheduled to speak in Paris. Markets often turn volatile during her speeches. This is because traders make an attempt to understand the direction of interest rates.

#9: United States ADP Non-Farm Employment Change (02/05/2020 Wednesday 13:15 GMT)

In the United States, private businesses hired 202,000 workers in December 2019, the most ever since April. The reading for the month came in well above analysts’ expectations of 160,000. The service-providing sector hired 173,000 workers, driven by trade, transportation, and utilities; professional and business, education and health; and financial activities. Employment fell in the information technology sector. The goods-producing sector hired 29,000 workers, driven by the construction sector. However, employment declined in the manufacturing and natural resources and mining sectors.

Forecast for January 2020: 150,000 jobs are expected to be added

#10: United States ISM Non-Manufacturing PMI (02/05/2020 Wednesday 15:00 GMT)

In the United States, the Non-Manufacturing PMI reported by the Institute for Supply Management rose to the 55.0 level in December 2019 from the 53.9 level in November 2019. The reading for the month came in slightly above analysts’ expectations of 54.5. The reading for December 2019 pointed to the highest increase in the services sector activities in four months. Production and inventories increased at a faster pace, while new orders, employment, new export orders growth slowed down. Companies expressed optimism about the possibility of resolution on tariffs. Capacity constraints reduced a little bit although labor resources challenges remained.

Forecast for January 2020: 55.1

#11: Australia Retail Sales (02/06/2020 Thursday 00:30 GMT)

In Australia, retail trade increased 0.9 percent on a month-over-month basis in November last year, beating analysts’ expectations for a 0.4 percent gain. The reading for the prior month was revised upward to an increase of 0.1 percent. The reading for the month pointed to the highest increase in retail sales ever since November 2017. Retail trade was driven by Black Friday sales. Clothing, footwear, and personal accessory retailers; department stores, household goods retailers; cafes, restaurants, and takeaway food service providers; and food retailers reported higher sales. On the other hand, sales of other retailers declined.

Forecast for December 2019: Retail trade is expected to decline by 0.2 percent

#12: Australia Trade Balance (02/06/2020 Thursday 00:30 GMT)

In Australia, the trade surplus widened to A$ 5.80 billion in the month of November last year after the trade surplus figure for the prior month was revised downward to A$ 4.08 billion. The trade surplus for the month came in above analysts’ expectations of A$ 4.15 billion. Exports increased by 2.0 percent and imports dropped by 3.0 percent.

Forecast for December 2019: Trade surplus is expected to come in at A$5.6 billion

#13: Euro Area ECB President Lagarde Speaks (02/06/2020 Thursday 08:00 GMT)

Christine Lagarde, President of the European Central Bank, is scheduled to testify before the European Parliament Economic and Monetary Affairs Committee in Brussels about the economy and monetary policy. Markets often turn volatile during her speeches. This is because traders make an attempt to understand the direction of interest rates.

#14: Australia RBA Governor Philip Lowe Speaks (02/06/2020 Thursday 22:30 GMT)

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

#15: Australia RBA Monetary Policy Statement (02/07/2020 Friday 00:30 GMT)

Released on a quarterly basis, the Monetary Policy Statement of the Reserve Bank of Australia provides valuable insights into the central bank’s view on inflation and economic conditions. These are the key factors that shape the direction of the monetary policy and impact the interest rate decisions.

#16: New Zealand Inflation Expectations (02/07/2020 Friday 02:00 GMT)

In New Zealand, the two-year inflation expectations data (the timeframe during which policy action affects prices) eased to the 1.80 percent level in the fourth quarter of last year from the 1.86 percent level in the prior three-month period. The annual inflation forecast averaged 1.66 percent over this year, down from the 1.71 percent level in the survey conducted in August.

#17: Canada Employment Change (02/07/2020 Friday 13:30 GMT)

Canada added 35,200 jobs in December last year after dropping 71,200 jobs in the prior month, the largest decline ever since January 2009. Analysts had expected the economy to add 25,000 jobs. Employment rose in Ontario, Quebec, Manitoba, and Prince Edward Island. However, jobs declined in Labrador and Newfoundland. More employees were hired in the private sector in December, offsetting the decline in November. Sector-wise, employment rose in construction and accommodation and food services. Employment remained little changed in other sectors.

#18: Canada Unemployment Rate (02/07/2020 Friday 13:30 GMT)

In Canada, the unemployment rate fell to the 5.6 percent level in December 2019 from the 5.9 percent level in the prior month. The reading for the month came in below analysts’ expectations of 5.8 percent. The economy hired 35,200 workers, driven by the increase in full-time jobs. The labor force participation rate dropped to the 65.5 percent level from the 65.6 percent level reported in November. The labor force participation rate came in below analysts’ expectations of the 65.7 percent level. In 2019, the unemployment rate declined to the record low level of 5.4 percent in the month of May.

#19: United States Average Hourly Earnings (02/07/2020 Friday 13:30 GMT)

In the United States, the average hourly earnings for all private nonfarm payroll employees rose by 0.1 percent in December 2019 after the reading for the prior month was revised upward to an increase of 0.3 percent. The reading for the month, however, missed analysts’ expectations for a gain of 0.3 percent. On a year-on-year basis, the average hourly earnings rose by 2.9 percent, easing from the 3.1 percent reported in the prior period. The reading for December was the weakest in terms of annual growth ever since July 2018. The average hourly earnings of nonsupervisory and private-sector production employees remained little changed in December last year.

Forecast for January 2020: The average hourly earnings are expected to increase by 0.30 percent

#20: United States Non-Farm Employment Change (02/07/2020 Friday 13:30 GMT)

In the United States, nonfarm payrolls rose by 145,000 in December last year, the least ever since May 2019, following the downward revised to 256,000 job additions in the prior month. The reading for the month came in well below analysts’ expectations that 164,000 workers would be hired. The retail and health care sectors hired the most number of workers. The mining sector reported job losses. The decline in nonfarm payrolls was partially attributed to a later-than-normal Thanksgiving Day last year, which contributed to a shift in the hiring of seasonal workers and to a boost in the return of workers from a GM strike in November.

Forecast for January 2020: Nonfarm payrolls are expected to increase by 160,000

#21: United States Unemployment Rate (02/07/2020 Friday 13:30 GMT)

In the United States, the unemployment rate remained steady at the 3.5 percent level in December last year at the lowest level ever since 1969. The data for the month was in line with analysts’ expectations. The number of jobless people dropped 58,000 to 5.75 million. The employment rose by 267,000 to 158.80 million. The labor force participation rate remained unchanged at the 63.2 percent level.

Forecast for January 2020: 3.5 percent

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