Forex Market Outlook for the Week October 26 – 30, 2020

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In the upcoming week, America’s GDP growth rate for the third quarter will be in focus. There are a few other economic data scheduled for release from other parts of the world as well. On the earnings front, top companies like Alphabet, Apple, Facebook, and Amazon are set to announce their quarterly financial results. The BoJ and the ECB are expected to reveal their monetary policy. Traders are also likely to focus on the Communist Party Congress in China and developments related to Brexit negotiations. Having said that here is an outlook on some of the important economic data announcements over the next week:

#1: Australia CPI (10/28/2020 Wednesday 00:30GMT)

In Australia, consumer prices fell 1.9 percent on a quarter-on-quarter in the second quarter of this year. In the previous quarter, consumer prices had risen by 0.3 percent. The reading for the quarter broadly matched with analysts’ expectations for a 2.0 percent decline but marked the sharpest fall on record. The slump in consumer prices in the second quarter was driven by the fall in oil prices and the decision of the government to make childcare free for the period April to June.

Forecast for the September quarter of 2020: 1.5 percent

#2: Australia Trimmed Mean CPI (10/28/2020 Wednesday 00:30GMT)

forex market outlookIn Australia, the Trimmed Mean CPI, the core measure of inflation that eliminates the largest price fluctuations, also remained subdued during the second quarter. The trimmed mean inflation rate dipped 0.1 percent in the June quarter of this year, registering the first decline in history.

Forecast for September quarter 2020: 0.3 percent

#3: Canada BoC Monetary Policy Report (10/28/2020 Wednesday 14:00GMT)

The Bank of Canada releases the Monetary Policy Report on a quarterly basis. The report provides valuable insights into the central bank’s view with respect to inflation and economic conditions, the major factors that are take into consideration for shaping the monetary policy.

#4: Canada BoC Rate Statement (10/28/2020 Wednesday 14:00GMT)

The Bank of Canada releases the Rate Statement eight times every year. The central bank uses it as a tool to communicate with investors as regards the monetary policy. In addition to indicating the outcome of the members’ decision on setting the interest rates, it provides commentary on the economic conditions that impacted their decision. More importantly, it provides the nation’s economic outlook and offers clues on future decisions.

#5: Canada BoC Overnight Rate (10/28/2020 Wednesday 14:00GMT)

In the meeting held in September, the Bank of Canada decided to leave its key interest rate unchanged at an effective level of 0.25 percent as was widely expected by analysts. The Monetary Policy Committee said that the quantitative easing program will be continued. The central bank will purchase at least C$5 billion of large scale assets (government bonds) per week. Further, policymakers indicated that Canada’s economy is recovering, following the easing of restrictions imposed in the wake of the spreading of the coronavirus and the supported provided through government programs for replacing incomes and subsidizing wages. The Monetary Policy Committee also noted that the economic activity is expected to bounce back at a rate that is faster than expected in the September quarter of this year. Policymakers also vowed to provide the extraordinary monetary policy support needed as the nation moves from opening up to recuperation. The Bank rate as well as the deposit rate was left unchanged at 0.5 percent and 0.25 percent, respectively.

Forecast for October 2020: 0.25 percent

#6: Canada BoC Press Conference (10/28/2020 Wednesday 15:15 GMT)

The Governor and the Senior Deputy Governor of the Bank of Canada hold a press conference for discussing the contents of the Monetary Policy Report approximately 75 minutes after the announcement of the interest rate. There are two parts to the press conference. In the first part, they read out a prepared statement. In the second part, they answer questions posed by press representatives. As the questions can lead to unscripted answers, heavy market volatility can be expected during the conference.

#7: Japan BoJ Outlook Report (10/29/2020 Thursday 03:00 GMT)

In the Outlook Report released in July, the Bank of Japan noted that the economy will likely improve gradually with the resumption of economic activity from the second half of this year. However, the rate of improvement is likely to be moderate as the impact caused by the novel coronavirus is being experienced worldwide. Thereafter, the impact is expected to subside globally and the economy will keep improving with overseas economies returning to the steady growth path.

#8: Japan BoJ Monetary Policy Statement (10/29/2020 Thursday 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 for communicating with investors as regards the monetary policy. It provides the outcome of the members’ decisions on asset purchases and commentary on the economic conditions that impacted their decision. More importantly, the statement projects the nation’s economic outlook and offers clues on future decisions.

#9: United States Advance GDP (10/29/2020 Thursday 12:30 GMT)

In the second quarter, the GDP of the United States shrank an annualized 31.4 percent. This is slightly lower compared to the second estimate of 31.7 percent and the 32.9 percent plunge in the advance estimate. The GDP figure for the quarter reflects the effect of upward revisions to personal consumption expenditures. However, the upward revision was partly offset by the downward revisions of nonresidential fixed investment and exports. Still, this is the biggest GDP contraction ever and it pushed the country into a recession. The coronavirus pandemic forced businesses – restaurants, cafes, factories, and stores – to close and people to stay indoors. This hurt both business and consumer spending. The Federal Reserve expects the economy to shrink by 3.7 percent this year, lower than the initial estimate for a 6.5 percent decline. The outlook for the next year remains uncertain as the pandemic is still not under control and no vaccine is ready as yet.

Forecast for the third quarter of 2020: 32.0 percent

#10: Euro Area ECB Main Refinancing Rate (10/29/2020 Thursday 12:45 GMT)

The officials of the European Central Bank indicated their readiness to adjust all the instruments at their disposal to make sure that inflation inched towards the target in a sustainable manner. Policymakers expressed their willingness to slash interest rates further into the negative territory and change the TLTROs’ conditions, according to the minutes of the meeting held in September. Policymakers also noted that the near-term price pressures are likely to remain subdued because of weak demand, appreciation of the euro, and lower-wage pressures. As per available information, the PEPP envelope is likely to be made use of in full for providing the required accommodation and offsetting the downward impact caused by the pandemic on inflation.

Forecast for October 2020: 0.00 percent

#11: Euro Area ECB Monetary Policy Statement (10/29/2020 Thursday 12:45 GMT)

The European Central Bank releases the Monetary Policy Statement eight times a year. At each release, the central bank makes slight changes to the statement. Traders focus on these changes as the ECB uses it as a tool for communicating with investors as regards the monetary policy. The statement contains the outcome of the members’ decision on setting interest rates and commentary on the economic conditions that impacted their decision. More importantly, it discusses the nation’s economic outlook and offers clues on future decisions.

#12: Euro Area ECB Press Conference (10/29/2020 Thursday 13:30 GMT)

The President and Vice President of the European Central Bank hold a press conference 45 minutes after the announcement of the Minimum Bid Rate. The press conference lasts for about an hour and has two parts: reading a prepared statement and answering questions posed by the press representatives. As the questions can lead to unscripted answers, heavy market volatility can be expected.

#13: Canada GDP

Canada’s economy expanded 3 percent on a month-on-month basis in July, following on the 6.5 percent expansion reported in the previous month. The GDP reading for July matched with analysts’ expectations. With this, the economy has recorded growth for three consecutive months. However, the activity continued to remain approximately 6 percent below the pre-pandemic levels seen in February. Both the goods-producing and services-producing sectors reported growth. All the 20 industrial sectors posted gains. The sectors that surpassed their pre-pandemic activity levels included agriculture; utilities; finance and insurance; and real estate, rental, and leasing. According to National Statistical Office, the growth in real GDP in August is expected to be 1.0 percent as output continues to increase in several sectors, following the easing of lockdown restrictions imposed to restrict the spread of the coronavirus.

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