Forex Market Outlook For The Week July 13 – 17, 2020

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In the upcoming week, companies will start reporting their second-quarter earnings. Some of the major banks and health care companies such as Johnson & Johnson, Citigroup, JPMorgan Chase, and Wells Fargo are scheduled to announce their June quarter financial results. Further, the central banks in the Euro Area, Japan, and Canada are announcing interest rates. Other important economic data scheduled to be released include the retail sales from the US, GDP from China and New Zealand, and employment data from Australia. Having said that here is an outlook for a few key releases:

#1: United Kingdom BoE Governor Bailey Speaks (07/13/2020 Monday 15:30 GMT)

Andrew Bailey, Governor of the Bank of England, is scheduled to participate in a panel discussion on the topic “Libor: Entering the Endgame”. The webinar is co-hosted by the Bank of England and the Federal Reserve Bank of New York. 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.

#2: Japan BoJ Quarterly Outlook Report (07/15/2020 Wednesday 03:00 GMT)

forex market outlookThe Quarterly Outlook Report released by the Bank of Japan on April 27 showed that the economy is expected to face a severe situation in the near future because of the impact of Covid-19 caused by the novel coronavirus at home and overseas. The central bank also noted that the rate of change in the Consumer Price Index (CPI) of all items except fresh food is likely to remain weak mainly due to the spread of COVID-19 and the fall in crude oil prices.

#3: Japan BoJ Monetary Policy Statement (07/15/2020 Wednesday 03:00 GMT)

The Bank of Japan releases the Monetary Policy Statement eight times a year. The central bank uses the Statement as a tool to communicate with investors as regards monetary policy. It provides the outcome of the members’ decisions on asset purchases. It also offers a commentary on the economic conditions that impacted their decision. More importantly, the Statement projects the country’s economic outlook and provides clues on future votes.

#4: Canada BoC Monetary Policy Report (07/15/2020 Wednesday 14:00 GMT)

Released on a quarterly basis, the Monetary Policy Report from the Bank of Canada provides valuable insights as to how the central bank is viewing the economic situation and inflation, the key factors that are considered for deciding the monetary policy and making interest rate decisions.

#5: Canada BoC Rate Statement (07/15/2020 Wednesday 14:00 GMT)

The Bank of Canada releases the Rate Statement eight times a year. The central bank uses the Rate Statement 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.

#6: Canada Overnight Rate (07/15/2020 Wednesday 14:00 GMT)

In the meeting held in June, the Bank of Canada decided to leave its interest rate unchanged at the current level of 0.25 percent as was widely expected by analysts. Policymakers said that the coronavirus pandemic has impacted output and employment. However, fiscal actions initiated and the lower interest rate levels are helping in economic recovery. The Monetary Policy Committee has also reduced the frequency of the term repo operations to one per week and the program to buy bankers’ acceptances to two times per week. However, policymakers expressed their readiness to make adjustments if the market condition warrants the same. Meanwhile, the programs to buy federal, corporate, and provincial debt are being continued at the current scope and frequency. Furthermore, the Committee reiterated its commitment to continuing its large-scale asset purchase program until the country’s economic recovery falls on the track. They also added that further action will be taken, if necessary, to bring the inflation within the target range. The central bank also left the deposit rate and the bank rate unchanged at 0.5 percent and 0.25 percent, respectively.

Forecast for July 2020: 0.25 percent

#7: Canada BoC Press Conference (07/15/2020 Wednesday 15:15 GMT)

The Governor of the Bank of Canada holds a press conference for discussing the contents of the Monetary Policy Report approximately 75 minutes after the announcement of the Overnight Rate. There are two parts to the press conference. In the first part, he reads out a prepared statement. In the second part, he answers questions from the press. As the questions can lead to unscripted answers, heavy market volatility can be expected.

#8: New Zealand CPI (07/15/2020 Wednesday 22:45 GMT)

In New Zealand, the Consumer Price Index rose 0.80 percent on a quarter-on-quarter basis in the first quarter of this year.

Forecast for the second quarter of 2020: -0.5 percent

#9: Australia Employment Change (07/16/2020 Thursday 01:30 GMT)

In May, Australia lost 227,700 jobs, following the revised 607,400 job losses in the prior month. The reading for the month was worse than analysts’ expectations for a loss of 125,000 jobs amid lockdowns and business closures because of the coronavirus pandemic. While full-time employment declined by 89,100 to the 8,540,000 level, part-time employment dropped by 138,600 to the 3,614,100 level.

Forecast for June 2020: 100,000 jobs are expected to be added

#10: Australia Unemployment Rate (07/16/2020 Thursday 01:30 GMT)

On a seasonally adjusted basis, Australia’s unemployment rate zoomed to the 7.1 percent level in May after the reading for April was revised upward to the 6.4 level. Analysts had expected the jobless rate to come in at the 7.0 percent level in May. The reading for May is the highest unemployment rate ever since October 2001 amid lockdowns and business closures due to the COVID-19 pandemic. In Australia, the number of unemployed people rose by 85,700 to more than a 26-year high level of 927,600. The number of Australians looking for full-time and part-time employment rose by 60,400 and 25,200, respectively. The participation rate declined to the 62.9 percent level, the lowest ever since January 2001.

Forecast for June 2020: 7.2 percent

#11: China GDP (07/16/2020 Thursday 02:00 GMT)

China’s GDP shrank by 6.8 percent in the first quarter of 2020 on a year-on-year basis as the Covid-19 seriously affected the economic activities of the second-largest economy in the world. Analysts had expected China’s GDP to contract by 6.5 percent in the March quarter. The economic activities came to a grinding halt after Beijing enforced large-scale quarantines and shutdowns to prevent human contact and contain the spread of the coronavirus disease.

Forecast for 2020: 2.2 percent

#12: Euro Area Main Refinancing Rate (07/16/2020 Thursday 11:45 GMT)

On June 25, the European Central Bank announced a new backstop facility to extend precautionary euro repo lines to the Central Banks outside the Euro Area in response to the crisis caused by the coronavirus pandemic. Policymakers said that the central bank’s Eurosystem repo facility (EUREP) will be available until June next year and that it will address euro liquidity needs in the event of any market dysfunction due to the COVID-19 shock that may adversely affect the smooth transmission of monetary policy by the ECB.

Earlier in June, the ECB had expanded the emergency purchase program by €600 billion to €1.35 trillion. The increase was more than the €500 billion that was widely expected. Further, the Main Refinancing Rate was left unchanged at the 0.00 percent level, while the overnight liquidity rate was fixed at 0.25 percent. The central bank also maintained the Deposit Facility Rate at -0.5 percent.

Forecast for July 2020: 0.00 percent

#13: Euro Area ECB Monetary Policy Statement (07/16/2020 Thursday 11:45 GMT)

The European Central Bank releases the Monetary Policy Statement eight times a year and makes slight changes at each release. Traders focus on these changes. The ECB uses the Monetary Policy Statement as a tool for communicating with investors as regards 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.

#14: Euro Area ECB Press Conference (07/16/2020 Thursday 12:30 GMT)

The President and Vice President of the European Central Bank hold a press conference approximately 45 minutes after the announcement of the Minimum Bid Rate. The press conference lasts for about an hour and has two parts. The first part is reading out a prepared statement. In the second part, they provide answers to questions from the press. As the questions can lead to unscripted answers, heavy market volatility can be expected.

#15: United States Core Retail Sales (07/16/2020 Thursday 12:30 GMT)

In the United States, core retail sales, which exclude autos, rose 12.40 percent on a month-over-month basis in May after the reading for the prior month was revised downward to a record decline of 15.2 percent. This is the highest increase ever in retail trade as Americans started going back to work and a large number of stores reopened after the lockdown restrictions were removed in stages.

Forecast for June 2020: 4.5 percent

#16: United States Retail Sales (07/16/2020 Thursday 12:30 GMT)

In the United States, retail sales jumped 17.7 percent on a month-on-month basis in May, recovering from the record 14.7 percent drop in April. Analysts had expected an increase of 8.0 percent in retail trade. This is the largest increase ever in retail trade as Americans returned to work and stores reopened after the lockdown. Largest increases were seen in clothing; furniture; sporting goods, hobby, book stores, and musical instruments; electronics and appliances; motor vehicles; drinking places and food services; gasoline stations; and miscellaneous stores. However, retail sales have declined 6.1 percent compared to the figure for the same month last year.

Forecast for June 2020: 4.6 percent

#17: United Kingdom Retail Sales (07/17/2020 Thursday 08:30 GMT)

In the United Kingdom, retail trade jumped 12 percent in May, the largest increase on record. The reading for the month also beat analysts’ expectations for a 5.7 percent gain. In May, the retail trade recovered from the record 18 percent plunge in the prior month. The largest contribution came from non-food stores, driven by sales of household goods such as hardware, glass, and paints. Online spending soared to the highest level on record and came in at 33.4 percent of the total spending. In April, it stood at 30.8 percent. However, retail sales were down 13.1 percent compared to that in the same month last year.

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