Forex Market Outlook For The Week September 2 – 6, 2019

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A little bit of calm on the trading front helped the greenback gain some ground against major world currencies, while the prorogation decision of the UK Prime Minister Johnson has weighed down the pound. As the trade war intensified, Chinese officials and President Donald Trump called for calm. This had a convincing effect on the markets and helped the U.S. dollar strengthen against other world currencies.

However, the inversion of the yield curve continued to serve an ominous sign about an upcoming recession. In the U.K., the Brexit drama touched new highs with Prime Minister Boris Johnson announcing the Parliament‘s suspension for five weeks. This would limit the chances of the opposition blocking a no-deal Brexit. In the Euro Area, the sluggish economic weighed down the euro and pushed the EUR/USD pair below the 1.10 level.

Apart from the US levying new tariffs on China on Sunday and deliberations related to the Brexit commencing on Tuesday, the upcoming week will be busy the US announcing jobs report, and ISM PMIs. Elsewhere, the central banks in Canada and Australia will be releasing monetary policy decisions. Having said that here is an outlook on some of the key decisions from around the word:

#1: China Caixin Manufacturing PMI (09/02/2019 Monday 1:45 GMT)

forex market outlookIn China, the Caixin manufacturing Purchasing Managers Index, reported by Markit Economics, declined to the 49.50 level in July from the 49.90 level reported in the previous month.

Forecast for August: 49.8

#2: Australia Retail Sales (09/03/2019 Tuesday 01:30 GMT)

In Australia, retail trade rose by 0.4 percent on a month-over-month basis in June, accelerating from the 0.1 percent increase in the prior month. The reading for June beat analysts’ expectations for a 0.3 percent gain. This is the strongest monthly gain in retail trade ever since February this year and boosted by rate cuts for the central bank, signs of the housing market turning around, and tax discounts to households announced by the government.

Five of out of the six industries reported gains. They are footwear, personal accessory retailing, and clothing; other retailing; restaurants, cafes, and takeaway services; household goods retailing; and food retailing. On the other hand, trade at department stores continued to decline.

Forecast for July 2019: Expected to increase by 0.2 percent

#3: Australia Cash Rate (09/03/2019 Tuesday 04:30 GMT)

The Reserve Bank of Australia decided to leave the cash rate steady at the record low level of 1.0 percent during the meeting in August after two consecutive interest rate cuts and said that it is likely for the inflation rate to take a longer time than earlier expected to return to the target 2.0 percent level. Further, Australia’s economic growth remained lower than what was previously forecasted. The central bank may cut interest rates later this year as the escalating trade war between the US and China trade is expected to pose a lot of risk to the country.

#4: Australia RBA Rate Statement (09/03/2019 Tuesday 04:30 GMT)

The Reserve Bank of Australia releases the Rate Statement on the first Tuesday of every month, excluding January. The RBA uses it as a tool to communicate with investors as regards monetary policy. It provides 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 country’s economic outlook and offers clues on future decisions.

#5: U.S. ISM Manufacturing PMI (09/03/2019 Tuesday 14:00 GMT)

In the US, the ISM Manufacturing PMI fell to the 51.2 level in July from the 51.7 level in the prior month. The reading for the month missed analysts’ expectations that the index would hit the 53.4 level. The reading for July also pointed to the weakest rate of growth in the manufacturing sector ever since August 2016. Production growth slowed drastically, while the job creation rate stood near the three-year low.

Forecast for August 2019: 51.2

#6: Australia GDP (09/04/2019 Wednesday 01:30 GMT)

Australia’s GDP advanced 0.4 percent on a seasonally adjusted basis in the first quarter of this year, accelerating from the 0.2 percent expansion in the prior period. However, the reading for the quarter missed analysts’ expectations for a 0.5 percent gain. An increase in spending by the government and a rebound in exports offset the decline in fixed investments and a slowdown in consumption by households.

Forecast for the June quarter of 2019: a 0.5 percent expansion is on the cards

#7: Canada Trade Balance (09/04/2019 Wednesday 12:30 GMT)

Canada’s trade surplus narrowed to C$0.14 billion in June after the surplus for the prior month was revised downward to C$0.56 billion. Analysts had expected the trade surplus to come in at C$0.3 billion. Canada has reported a trade surplus for the third month since December. Exports dropped 5.1 percent and imports declined at a softer pace of 4.3 percent because of significant decreases in sales of crude oil and aircraft as well as other transportation equipment and parts.

Forecast for July 2019: C$0.20 billion

#8: U.K. Inflation Report Hearings (09/04/2019 Wednesday 13:15 GMT)

Scheduled to be held on a quarterly basis, the Governor of the Bank of England and many MPC members testify on inflation as well as the economic outlook before the Treasury Committee of the Parliament. The hearings last for a few hours and create market volatility. Traders and investors lookout for direct comments made about the forex markets.

#9: Canada BoC Rate Statement (09/04/2019 Wednesday 14:00 GMT)

Released 8 times in a year, it is the primary tool as far as the Bank of Canada is concerned for its communications with the investors as regards the monetary policy. It provides the outcome of the members’ decision on setting interest rates and commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and also clues on future decisions.

#10: Canada Overnight Rate (09/04/2019 Wednesday 14:00 GMT)

In the meeting held in July, the Bank of Canada decided to hold the benchmark interest rate at the 1.75 percent level as was widely expected by the market. This is the highest rate ever since December 2008. Policymakers noted that the degree of accommodation of the monetary policy is appropriate and that the developments in the energy sector and the impact of trade conflicts on Canada’s growth prospects and inflation will be monitored. The deposit and Bank Rate were left steady at 1.50 percent and 2.0 percent, respectively.

Forecast for September 2019: 1.75 percent

#11: U.S. ADP Non-Farm Employment Change (09/05/2019 Thursday 12:15 GMT)

In the U.S., private businesses hired 156,000 workers in July, more than analysts’ expectations of 150,000 job additions. The job addition figure for June was revised upward to 112,000. The service-providing sector hired 146,000 workers, driven by increases in employment in professional and business; education and health; trade, transportation, and utilities; leisure and hospitality; financial activities; and other services sectors. The information sector dropped 5,000 jobs. The goods-producing sector hired 9,000 jobs, driven by construction and manufacturing activities. However, jobs declined in the mining and natural resources sectors.

Forecast for August 2019: 150,000

#12: U.S. Crude Oil Inventories (09/05/2019 Thursday 15:00 GMT)

In the US, crude oil stocks dropped 10.027 million barrels during the week that ended on August 23, following the 2.7 million barrels decline in the prior week. Analysts had expected a decline of 2.112 million barrels. Gasoline inventories declined 2.09 million barrels after the 0.31 million barrel increase in the previous week. Analysts had expected gasoline stocks decline by 0.388 million barrels.

#13: Switzerland SNB Chairman Jordan Speaks (09/05/2019 Thursday 16:00 GMT)

Thomas Jordan, SNB Chairman, is scheduled to deliver a talk on “Currencies, Money and Digital Tokens” in Basel at an anniversary celebration. Markets often remain volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates.

#14: Canada Employment Change and Unemployment Rate (09/05/2019 Friday 12:30 GMT)

Canada lost 24,200 jobs in July after dropping 2,200 in the prior month. Analysts had expected the country to add 12,500 jobs in July. Employment declined in Alberta, Nova Scotia, and New Brunswick. It was unchanged in other provinces. On the other hand, employment increased in Quebec and Prince Edward Island. Employment fell in wholesale and retail; transportation and warehousing; other services; and natural resources sectors. Employment increased in the construction sector. Private sector jobs fell, but employment remained steady in the public sector. Employment in the self-employed sector increased.

#15: U.S. Average Hourly Earnings (09/05/2019 Friday 12:30 GMT)

In the US, the average hourly earnings of all categories of employees on private nonfarm payrolls increased 0.3 percent in July after the reading for the prior period was revised upward to 0.3 percent increase. Analysts had expected the average hourly earnings to increase by 0.2 percent. The average hourly earnings of nonsupervisory and private-sector employees in the production sector rose by 0.2 percent.

Forecast for August 2019: 0.3 percent increase expected

#16: U.S. Non-Farm Employment Change and Unemployment Rate (09/05/2019 Friday 12:30 GMT)

In the US, nonfarm payrolls increased by 164,000 in July after the reading for the prior period was revised downward to 193,000. The reading for July was in line with analysts’ expectations. Employment increased in professional and technical services, health care, social assistance, and financial activities sectors.

The unemployment rate in the US came in at 3.7 percent in the month of July, the same as that for the previous month. The reading was also in line with analysts’ expectations. The number of jobless people increased by 88,000 to 6.1 million and employment rose by 283,000 to 157.3 million.

Forecast for August 2019: The economy is expected to 168,000 jobs and the unemployment is anticipated to remain at the 3.7 percent level

#17: U.S. Fed Chair Jerome Powell Speaks (09/05/2019 Friday 16:30 GMT)

Jerome Powell, Fed Chair, is scheduled to deliver a talk on “Economic Outlook and Monetary Policy” in Zurich at an event hosted by the Swiss Institute of International Studies. Audience questions expected. Markets often remain volatile during his speeches as traders try to understand the direction of interest rates.

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