Forex Market Outlook For The Week June 29 – July 03, 2020

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Investors will most likely continue to track the economic impact caused by the pandemic amid signs of a second wave of infections. The upcoming week is a little lean as far as economic data releases are concerned. Fed Reserve Chair Jerome Powell’s testimony to the House, US jobs report, China manufacturing PMI, and Canada GDP growth rate stand out. Having said that here is an outlook on a few important releases:

#1: China Manufacturing PMI (06/30/2020 Tuesday 01:00 GMT)

In China, the Manufacturing PMI reported by the NBS came in at the 50.6 level in May after registering 50.8 in the prior month. Analysts had expected the index to come in at the 51.0 level in May. With this, the factory activity has increased for three months in a row after businesses resumed operation adhering to strict public health control measures for containing the COVID-19 outbreak. Output, new orders, and buying levels rose with export sales declining at a slower pace. In the meanwhile, employment dropped for the very first time in as many as three months amid an increase in supplier’s delivery time. Input costs rose for the very first time ever since February, while selling prices moved southward. Looking forward, business sentiment rose to the highest level in four months.

Forecast for June 2020: 50.4

#2: Canada GDP (06/30/2020 Tuesday 12:30 GMT)

forex market outlookCanada’s GDP shrank 7.2 percent on a month-on-month basis in March after the growth for the prior month was revised upward to 0.1 percent. However, the reading for the month came in below analysts’ expectations for a 9.0 percent decline. This was the sharpest contraction on record and was attributed to the impact of the coronavirus pandemic. The services-producing industries shrank 8.1 percent after staying flat in February as accommodation and food and retail trade registered record declines. The goods-producing industries declined 4.6 percent after expanding 0.3 percent in the prior month. The manufacturing sector declined to the lowest level ever since 2016 second half amid business closures in the wake of the Covid-19 pandemic. Further, Canada’s National Statistical Office offered a preliminary estimate of an 11 percent real GDP contraction in April.

Forecast for April 2020: – 10.5 percent

#3: United States Fed Chair Powell Testifies (06/30/2020 Tuesday 16:30 GMT)

Jerome Powell, Federal Reserve Chair, and Steven Mnuchin, Treasury Secretary, are scheduled to testify before the House Financial Services Committee in Washington DC. There are two parts to the testimony. In the first part, they read out a prepared statement. In the second part, they answer questions posed by the committee. The questions often lead to unscripted answers and this leads to heavy market volatility.

#4: United States ADP Non-Farm Employment Change (07/01/2020 Wednesday 12:15 GMT)

In the United States, private businesses shed 2,760,000 jobs in May after job loss for the prior month was revised downward to 19,560,000, the biggest loss ever in employment because of the coronavirus pandemic and lockdowns. The reading for the month came in below analysts’ expectations for a 9 million decline. While the service-providing sector lost 1,967,000 jobs in trade, transportation and utilities; professional and business services; education and health; information, and hospitality and leisure, the goods-producing sector shed 794,000 jobs in manufacturing; natural resources and mining; and construction. Private payrolls dropped mostly in large enterprises. Jobs declined in midsized and small businesses as well.

Forecast for June 2020: 3,000,000

#5: United States Average Hourly Earnings (07/02/2020 Thursday 12:30 GMT)

In the United States, the average hourly earnings of all employees on private nonfarm payrolls declined by 1.0 percent on a month-on-month basis in May, following the gain in April. The average hourly earnings of production and nonsupervisory employees in the private sector declined in May. The fall in average hourly earnings reflects job gains amidst lower-paid workers. This change, however, put downward pressure on estimates with respect to average hourly earnings.

Forecast for June 2020: –0.5 percent

#6: United States Non-Farm Employment Change (07/02/2020 Thursday 12:30 GMT)

The United States unexpectedly added 2,500,000 jobs in May, the maximum on record. The figure for the month beat analysts’ expectations for an 8,000,000 job loss. In April, the nation had registered a record high job loss of 20,700,000. Employment increases were the highest in hospitality and leisure; education, construction, and health services; and retail trade. However, government employment continued its sharp decline. The employment figure for March and April were revised downward to -1,400,000 and -20,700,000 respectively. The employment change data for May indicated that the economic recovery may happen faster than expected. However, the riots and looting that followed after George Floyd’s death could impact the recovery. This is because many of the states have declared an emergency and imposed curfews. Further, these protests could also lead to a second wave of the pandemic.

Forecast for June 2020: 3,000,000

#7: United States Unemployment Rate (07/02/2020 Thursday 12:30 GMT)

In the United States, the unemployment rate fell to the 13.3 percent level in May 2020 from the 14.7 percent level in April, the highest in record right from 1939. The figure for the month came in much below analysts’ expectations for a jobless rate of 19.8 percent. This was attributed to the gradual relaxation of lockdown measures. The number of jobless persons in the US dropped by 2,100,000 to 21,000,000 as those on temporary layoff declined by 2,700,000 to 15,300,000. Among those that are not on layoff temporarily, the number of losers of permanent jobs rose by 295,000 to 2,300,000 million. The number of employed Americans rose to 137.2 million and the labor force participation rate came in at 60.8 percent after hitting the lowest level ever since January 1973 in the previous month.

Forecast for June 2020: 12.5 percent

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