Forex Market Outlook For The Week October 21 – 25, 2019

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Last week, the Brexit drama was on top gear but calm prevailed on the trade tariff front. White smoke emanated as a Brexit deal was clinched in Brussels. The British pound extended its gains and touched the highest level in as many as five months in spite of the fact that the agreement was rejected by the Northern Irish Democratic Unionist Party. Markets were also benefited by the news. Now, the Brexit deal has to be approved by the parliament. In the U.S., retail sales data disappointed and weighed on the dollar. An economic slowdown in China raised some serious concerns.

In the upcoming week, the focus gets shifted to Europe once again as Mario Draghi, President of European Central Bank, is getting ready to announce his last interest rate decision. Having said that here is an outlook on the releases scheduled for the upcoming week:

#1: Canada Core Retail Sales (10/22/2019 Tuesday 12:30 GMT)

In Canada, core retail sales, which exclude autos, declined 0.10 percent in the month of July from 0.90 percent in the previous month.

#2: Bank of Canada Business Outlook Survey (10/22/2019 Tuesday 14:30 GMT)

forex market outlookReleased on a quarterly basis, the report is highly respected because of its source and release timing. It has an impact on interest rate decisions. In addition, it is known for its predictive qualities as regards the future economic conditions. This is because the firms surveyed are selected on the basis of their contribution to the country’s GDP;

It provides an indication of Canada’s economic health as businesses react rather quickly to the conditions of the market. Changes in firms’ sentiment provide early signals about future economic activities – spending, investment, and hiring.

#3: U.S. Crude Oil Inventories (10/23/2019 Wednesday 14:30 GMT)

In the U.S., crude oil stocks rose by 9.281 million barrels during the week that ended on October 11, following on the 2.927 million barrels gain in the prior week. Analysts had expected stocks to rise by 2.878 million barrels. This was the largest gain in crude oil inventories ever since the week that ended on April 26. Meanwhile, gasoline stocks declined 2.562 million barrels, following on the 1.213 million barrels decrease in the previous week. Analysts had expected gasoline stocks to drop by 1.209 million barrels.

#4: Euro Area France Flash Services PMI (10/24/2019 Thursday 07:15 GMT)

In France, the IHS Markit Services PMI dropped to the 51.1 level in September from the nine-month high level of 53.4 reported in August. The reading for the month came in below analysts’ expectations of 51.6. The latest reading, however, pointed to the weakest expansion in the services sector ever since April. The growth of new orders slowed to a four-month low because of a decline in international sales. Exports dropped for the first time in as many as four months and each covered subsector recorded reductions apart from Financial Intermediation. In addition, the rate of creation of jobs increased at the weakest rate ever since April. Input cost inflation slowed down to the weakest level in just over two years. However, service providers expressed optimism as regards business outlook because of expectations related to a rise in new work.

Forecast for October 2019: 51.6

#5: Euro Area Germany Flash Manufacturing PMI (10/24/2019 Thursday 07:30 GMT)

In Germany, the IHS Markit/BME Manufacturing PMI was revised upward to the 41.7 level in September from the preliminary reading of 41.4. In the previous month, the final reading of the manufacturing PMI was 43.5. The latest reading indicated the largest contraction in the manufacturing sector ever since June 2009. Output fell the most ever since July 2012. New orders recorded the largest decline ever since April 2009. This led to a further decline in the work backlog. Further, the rate of loss of jobs accelerated to the fastest level ever since January 2010. Input cost decline was the second-quickest ever since April 2016. Output charges dropped the most in about three-and-a-half years. The latest data showed that manufacturers were pessimistic as regards the outlook in September. However, their expectations were higher compared to the seven-year low recorded in August.

Forecast for October 2019: 42.0

#6: Euro Area Germany Flash Services PMI (10/24/2019 Thursday 07:30 GMT)

In Germany, the IHS Markit Services PMI was revised downward to the 51.4 level in September from the preliminary reading of 52.5. In the prior month, the index stood at 54.8. The latest reading of the index pointed towards the slowest pace of expansion within the services sector ever since September 2016. New business inflows dropped for the very first time ever since December 2014. The new export business declined the most in more than five years. While outstanding business dropped for the second consecutive month, employment continued to gain at a strong pace. Input cost inflation slowed to the lowest level since March 2018. Output charge inflation slowed to the second-weakest level in the last one-and-a-half years.

Forecast for October 2019: 52.0

#7: Euro Area EC Main Refinancing Rate (10/24/2019 Thursday 11:45 GMT)

In the meeting held in September, the members of the monetary policy committee of the European Central Bank decided to leave the main refinancing rate unchanged at the 0.00 percent level. However, the deposit interest rate was lowered by 10 basis points to the -0.5 percent level. Further, the policymakers approved bond purchases at a monthly rate of €20 billion from November 1, 2019, for boosting growth and inflation in the midst of Brexit uncertainty and global trade tensions. The ECB also lowered its GDP forecast to 1.1 percent in 2019 and 1.2 percent in 2020. Further, the inflation expectation was also cut down to 1.2 percent in 2019, 1.0 percent in 2020, and 1.5 percent in 2021.

Forecast for October 2019: 0.00 percent

#8: Euro Area EC Monetary Policy Statement (10/24/2019 Thursday 11:45 GMT)

The European Central Bank normally changes the statement a little at each release. Traders often focus on these changes. The ECB uses the Monetary Policy Statement as a tool for communicating with investors as regards the monetary policy decisions. It provides the outcome of the members’ decision on setting interest rates and commentary on the economic conditions that impacted their decision. More importantly, the statement discusses the economic outlook and provides clues on future decisions.

#9: Euro Area ECB Press Conference (10/24/2019 Thursday 12:30 GMT)

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

The ECB uses the press conference as a tool to communicate with investors as regards the monetary policy. It provides in-depth insights into the factors that impacted the decisions on setting interest rates and other policy measures. More importantly, they provide clues on future monetary policy decisions.

#10: U.S. Core Durable Goods Orders (10/24/2019 Thursday 12:30 GMT)

In the U.S., core durable goods orders, which exclude transportation, rose by 0.50 percent in August, rebounding from the upwardly revised decline of 0.50 percent in July.

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