Forex Market Outlook For The Week July 27 – 31, 2020

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The second-quarter earnings season is in progress in the US and companies such as Apple, Alphabet, Amazon, Facebook, Pfizer, P&G, and Gilead Sciences are scheduled to report their results in the upcoming week. On the economic front, the monetary policy meeting of the Fed and the advance GDP data of the US for the second quarter will be keenly watched. Germany and Canada are also due to announce their GDP growth rate. Other important releases include CPI reading from Australia and Manufacturing PMI from China. Having said that here is an outlook on some of the key releases:

#1: Australia CPI (07/29/2020 Wednesday 01:30 GMT)

In Australia, the consumer prices rose by 0.3 percent on a quarter-on-quarter basis in the first quarter of this year, the lowest reading in a year, after increasing by 0.7 percent during the prior period. The reading for the March quarter of 2020, however, came in above analysts’ expectations for an increase of 0.2 percent.

Forecast for the second quarter of 2020: -2.0 percent (07/29/2020 Wednesday 01:30 GMT)

#2: Australia Trimmed Mean CPI (07/29/2020 Wednesday 01:30 GMT)

forex market outlookIn Australia, the Trimmed Mean Inflation Rate rose by 0.5 percent on a quarter-over-quarter basis in the March quarter of this year.

Forecast for the second (June) quarter of 2020: 0.1 percent

#3: United States Pending Home Sales (07/29/2020 Wednesday 14:00 GMT)

In the United States, contracts for buying previously owned homes rose by 44.3 percent, the largest rise ever, following the record 21.8 percent drop in April. Figures for the month beat analysts’ expectations for an increase of 18.9 percent as all major regions recorded increases in pending home sales transactions on a month-over-month basis. Lawrence Yun, the chief economist of NAR, said that there is a significant improvement outlook as new home sales are likely to be higher in 2020 than last year and annual existing-home sales are projected to decline by less than 10 percent despite the fact that the spring buying season has been missed due to the pandemic lockdown.

Forecast for 2020: 15.6 percent

#4: United States FOMC Statement (07/29/2020 Wednesday 18:00 GMT)

The US FOMC releases the Interest Rate Statement eight times in a year. At each release, the FOMC makes some small changes. Traders focus on these changes. The Fed uses the Statement as a tool for communicating with investors as regards the monetary policy. It provides the outcome of the members’ vote on setting interest rates and several other policy measures. In addition, it offers commentary on the economic conditions that impacted their votes. More importantly, the Statement discusses the nation’s economic outlook and offers clues on future decisions.

#5: United States FOMC Press Conference (07/29/2020 Wednesday 18:30 GMT)

Federal Reserve Chair Jerome Powell holds a press conference 30 minutes after the announcement of the interest rate. The press conference lasts for about one hour and has two parts. In the first part, he reads out a prepared statement. This is followed by a question and answer session with the press. As the questions can lead to answers that are not already scripted, heavy market volatility can be expected.

#6: Euro Area Germany Preliminary GDP (07/30/2020 Thursday 08:00 GMT)

Germany’s GDP shrank by 2.2 percent on a quarter-on-quarter basis in the March quarter of this year, following the 0.1 percent decline in the prior period and entered a recession. This is the steepest GDP contraction since the March quarter of 2009 and the second largest contraction ever since the unification of Germany. Efforts taken to contain the coronavirus pandemic forced most businesses to close down and people to remain at home. Household consumption fell 3.2 percent after remaining unchanged in the prior quarter. Fixed investment in equipment and machinery tumbled 6.9 percent and the same in other products declined by 0.3 percent. Contribution from net trade to the GDP also was negative as imports and exports fell. Government spending remained little-changed, while investment in construction rose considerably.

Forecast for June quarter of 2020: -9.0 percent

#7: United States Advance GDP (07/30/2020 Thursday 12:30 GMT)

America’s GDP shrank by 5 percent (annualized) in the March quarter of this year. This was in line with the prior estimate and ended the longest expansion period in the history of the country. This is the biggest fall in GDP ever since the final quarter of 2008 as the coronavirus pandemic forced many states to implement lockdown measures starting mid-March. Millions of people lost jobs due to the lockdown. In the final estimate, the upwardly revised nonresidential fixed investment offset the downward revision to the private inventory investment, exports, and personal consumption expenditures.

Forecast for the second quarter of 2020: -35.0 percent

#8: China Manufacturing PMI (07/31/2020 Friday 01:00 GMT)

In China, the Manufacturing PMI reported by the NBS unexpectedly increased to the 50.9 level in June from the 50.6 level in the prior month. Analysts had expected the PMI to come at 50.4. With this, the factory activity in China has increased for four straight months and at the strongest level ever since March. The economy continued to recover following the lifting of the strict COVID-19 related lockdowns and the ramping up of investments by businesses. Output increased the most in as many as three months. Both new orders and buying levels rose for the fourth straight month at a faster rate. Meanwhile, both export sales and employment contracted at a softer pace. Suppliers’ delivery time remained unchanged. Input cost rose for the second straight month and at a faster rate. Selling prices increased following the decline in May Though sentiment eased, it remained solid.

Forecast for July 2020: 50.8

#9: Canada GDP (07/31/2020 Friday 12:30 GMT)

In April, Canada’s GDP shrank 11.6 percent on a month-over-month, following the 7.5 percent contraction in the prior month. Analysts had expected the economy to shrink by 13 percent in April. This was by far the steepest contraction on record as April was the first full month of implementation of coronavirus lockdown measures. All the 20 industrial sectors – including manufacturing; construction; retail trade; transportation and warehousing; accommodation and food services; and wholesale trade – declined. In the public sector, health care; educational services; and public administration contracted. Furthermore, output shrank in real estate; mining, quarrying and oil; finance and insurance; and utilities. The preliminary estimate of the National Statistical Office is that the economy will register a 3.0 percent real GDP expansion in May amid the easing of COVID-19 lockdown restrictions.

Forecast for May 2020: 3.3 percent

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