Forex Market Outlook For The Week June 22 – 26, 2020

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Investors would continue to keep monitoring the spread as well as the impact of the coronavirus. A spike in the number of new cases in China and the US raised fears about the possibility of a second wave of infections. In the upcoming week, PMI data from France and Germany and interest rate decisions from New Zealand stand out. Having said that here is an outlook on a few key releases from around the world:

#1: Australia RBA Governor Philip Lowe Speaks (06/21/2020 Sunday 23:00 GMT)

Philip Lowe, Governor of the Reserve Bank of Australia, is scheduled to participate in a panel discussion on “COVID-19 and the global economy” at the Australia National University Crawford Leadership Forum. Attendees are expected to ask questions. Markets often turn volatile during his speeches as questions can lead to unscripted answers. Furthermore, traders look forward to understanding the direction of interest rates in the near future.

#2: Canada BoC Governor Till Macklem Speaks (06/22/2020 Monday 15:00 GMT)

Tiff Macklem, Governor of the Bank of Canada, is scheduled to speak at a video conference about monetary policy in the context of COVID-19. The conference is hosted by Cercles canadiens and the Canadian Clubs. Attendees are expected to ask questions. Markets often turn volatile during his speeches as questions can lead to unscripted answers. Furthermore, traders look forward to understanding the direction of interest rates in the near future.

#3: Euro Area France Flash Services PMI (06/23/2020 Tuesday 07:15 GMT)

forex market outlookIn France, the Services PMI reported by IHS/Markit was revised upward to the 31.1 level in May 2020 from the preliminary reading of 29.4. In April, the index came in at the record low level of 10.2. However, the reading still pointed to the third-highest contraction ever since the start of the series. A number of firms continued to remain closed amid the coronavirus pandemic. New orders and output continued to shrink, although at a slower rate amid a decline in demand. Further, new export orders dropped for the third month in a row as the export partners remained under lockdown due to the pandemic. However, the job loss rate slowed as a few firms made use of the ‘partial unemployment’ scheme to maintain their staffing levels. Input prices declined at a slower rate amid declines in wage expenditure and fuel prices. Output charges dropped for the third consecutive month. However, the service providers in France expressed optimism as regards the 12-month business and it represented a positive reading for the first time since February.

Forecast for June 2020: 44.9

#4: Euro Area Germany Flash Manufacturing PMI (06/23/2020 Tuesday 07:30 GMT)

In Germany, the Manufacturing PMI reported by IHS Markit/BME was revised downward to the 36.6 level in May from the initial estimate of 36.8. The reading indicated that the country’s manufacturing sector continued to suffer because of the coronavirus pandemic. New orders and output fell sharply, following on the record drop in April. Work backlogs fell at a pace that was almost the same as in April. Goods producers further reduced staff strength during the month, through redundancies and partially by not renewing fixed-term contracts. Furthermore, the job loss rate continued to accelerate, registering the quickest pace ever since May 2009. Both output and input prices continued to fall. Though the sentiment improved from the historically low level hit in March, the index as regards the output for the next one year remained firmly in the negative territory.

Forecast for June 2020: 41.5

#5: Euro Area Germany Flash Services PMI (06/23/2020 Tuesday 07:30 GMT)

In Germany, the Services PMI reported by IHS Markit was revised upward to the 32.6 level in May from the preliminary reading of 31.4. The reading for the month indicated a slight recovery from the record low level of 16.2 recorded in the prior month. However, the reading for May still pointed to a large contraction of activity in the services sector as the COVID-19 pandemic continued to impact businesses and hamper demand. A reduction in the lockdown restrictions contributed to the easing of the contraction in business activity, employment, and new orders. However, only certain parts of the services sector actually resumed operations. The latest data revealed no changes in the input prices to service providers, but output prices dropped though at the second-fastest pace ever since October 2009. Finally, though there was a recovery further from the record low levels hit in March, the expectations index remained deep in the negative territory. This reflected a high level of uncertainty in the business sector and concerns as regards a squeeze on incomes because of COVID-19 regulations.

Forecast for June 2020: 41.7

#6: New Zealand Official Cash Rate (06/24/2020 Tuesday 02:00 GMT)

In the meeting held in May, the Reserve Bank of New Zealand decided to leave the official cash rate (OCR) unchanged at the record low of 0.25 percent. According to the policymakers, the domestic economic situation has deteriorated since the last meeting because of the coronavirus pandemic. They projected that the contraction in activity is likely to reduce employment and inflation below the objectives set by the central bank for many years. Further, the Monetary Policy Committee expanded the Large Scale Asset Purchase program potential to NZ$60 billion from NZ$33 billion in order to quickly further reduce the cost of borrowing. Policymakers also noted that a negative OCR might be an option in the future, even though the financial institutions are not yet operationally ready as yet. In addition, the Committee added that it is ready to employ more monetary policy tools at its disposal if required, and this includes further reducing the OCR, adding different types of assets to the LSAP program, and extending fixed-term loans to banks.

Forecast for June 2020: 0.25 percent

#7: New Zealand RBNZ Rate Statement (06/24/2020 Tuesday 02:00 GMT)

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

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