Forex Market Outlook For The Week October 15 – 19, 2018

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Last week, the U.S. dollar remained weak as the stock market and economic data releases failed to impress the traders and investors. In the U.S., the core inflation data missed analysts’ expectations and weighed down the dollar. Moreover, consumer sentiment also declined. The stock markets fell because of fear about interest rates going higher and the imposition of tariffs on Chinese goods, triggering expression of anger by President Donald Trump against the policy of the Fed in raising interest rates. This resulted in the greenback losing ground. The Brexit negotiations were in full swing last week. It is hoped that a deal will be finalized during the summit in the upcoming week. Italy continued to remain a source of concern.

Some of the key releases scheduled for the upcoming week include the FOMC minutes, U.S. retail sales, and the EU Summit on Brexit. Here is an outlook on these as well others from elsewhere in the world:

#1: U.S. Retail Sales (10/15/2018 Monday 12:30 GMT)

forex market outlookIn the U.S., retail sales rose by 0.1 percent on a month-over-month basis in August after the reading for the prior month was revised upward to a 0.7 percent increase. The reading for August, however, came in well below analysts’ expectations for a 0.4 percent rise. This is by far the smallest increase in retail sales in as many as six months mainly because of declines in motor vehicles, furniture, and clothing purchases. Forecast for September 2018: Retail sales are expected to rise by 0.7 percent

#2: U.S. Core Retail Sales (10/15/2018 Monday 12:30 GMT)

In the U.S., retail trade, excluding autos, rose by 0.3 percent on a month-on-month basis in August 2018 after the reading for the prior month was revised upward to an increase of 0.9 percent. Analysts had expected the core retail sales to increase by 0.5 percent. Forecast for September 2018: Core retail sales in the U.S. is expected to increase by 0.4 percent

#3: Canada BoC Business Outlook Survey (10/15/2018 Monday 14:30 GMT)

The last Business Outlook Survey Report summer 2018 was released by the Bank of Canada on June 29, 2018. The report suggested widespread business optimism. The central bank’s outlook survey indicator rose to its highest level ever since the 2011 second quarter as responses received for most of the survey questions were above the historical averages. The Bank of Canada, however, noted that the firms were interviewed as part of the business survey before the announcement of tariffs on aluminum and steel imports from Canada by the United States.

#4: New Zealand CPI (10/15/2018 Monday 21:45 GMT)

In New Zealand, the Consumer Price Index rose by 0.40 percent on a quarter-on-quarter basis in the second quarter of this year. Forecast for the third quarter of 2018: The inflation rate is expected to come in at 0.7 percent

#5: U.K. Average Earnings Index (10/16/2018 Tuesday 08:30 GMT)

The total earnings of U.K. workers, including bonuses, rose by 2.6 percent to £520 per week during the three-month period to July after registering an increase of 2.4 percent in the prior period. Analysts had expected the average earnings index to remain at the same level. Wages increased in both the public and private sectors, services (wholesaling, retailing, restaurants, and hotels). Meanwhile, the earnings growth was less in the manufacturing and construction sectors.

Excluding the bonuses, the earnings rose by 2.9 percent to £489 per week, the highest increase ever since March, after registering a 2.7 percent gain in the prior period. The reading for the period beat analysts’ expectations for an increase of 2.8 percent. In real terms, the earnings including bonuses rose by 0.2 percent and excluding bonuses increased 0.5 percent as wages rose faster than the prices. However, the real wages continued to remain below the levels prior to the financial crisis. Forecast for the three months to August: an increase of 2.6 percent is on the cards

#6: U.K. CPI (10/17/2018 Wednesday 08:30 GMT)

In the U.K., consumer prices rose by 0.7 percent in August from the previous month after remaining unchanged in the month of July. The reading for the month, however, came in above analysts’ expectations for an increase of 0.5 percent. Prices of transport, furniture, clothing and footwear, maintenance and household equipment, culture and recreation, miscellaneous goods/services, food and beverages (non-alcoholic), housing and utilities, and hotels and restaurants increased. Forecast for September 2018: an increase of 2.6 percent is on the cards

#7: U.S. FOMC Meeting Minutes (10/17/2018 Wednesday 18:00 GMT)

The Federal Reserve releases the FOMC meeting minutes eight times in a year, three weeks after the announcement of the Federal Funds Rate. The Minutes provides a detailed account of the most recent meeting of the FOMC and an in-depth insight into the financial and economic conditions that impacted their vote with regard to setting the interest rates.

#8: Australia Employment Change (10/18/2018 Thursday 00:30 GMT)

Australia added an impressive 44,000 jobs in August. The reading came in significantly above analysts’ expectations. In September, a modest increase of 15,200 jobs, which aligns more with the averages seen in recent years, is expected. The job market in Australia is doing reasonably well in spite of fears about China and some hitches in the housing segment.

#9: Australia Unemployment Rate (10/18/2018 Thursday 00:30 GMT)

In Australia, the unemployment rate came in at 5.3 percent on a seasonally adjusted basis in the month of August. Unemployment stood at the same level as in the previous month and matched with analysts’ expectations. Currently, the jobless rate is at the lowest level ever since November 2012. The number of unemployed people in Australia increased 5,800. Forecast for September 2018: 5.3 percent

#10: Japan BoJ Governor Haruhiko Kuroda Speaks (10/18/2018 Thursday)

Haruhiko Kuroda, Governor of the Bank of Japan, is scheduled to speak at the BOJ’s quarterly meeting of the branch managers in Tokyo. Markets often turn volatile during his speeches as traders try to understand the direction of interest rates.

#11: U.K. Retail Sales (10/18/2018 Thursday 08:30 GMT)

In the U.K., retail sales rose by 0.3 percent on a month-on-month basis in August after the reading for the prior month was revised upward to an increase of 0.9 percent. The reading for the month beat analysts’ expectations for a 0.2 percent decline. Sales at household goods and other non-food stores registered gains, while retail trade declined at food and clothing stores. On a year-on-year basis, retail trade increased 3.3 percent in the month of August, well above analysts’ expectations for a 2.3 percent increase. Forecast for September 2018: Retail trade is expected to decline by 0.3 percent

#12: Euro Zone EU Economic Summit (10/18/2018)

The European Union leaders, including the U.K., are scheduled to meet at the planned summit. The Brexit will be the main issue that will be discussed. The Brexit deal was set to be achieved by this date, but it has not happened. Both sides have been reporting the progress in talks following the conclusion of the Conservative Party’s Conference. The most vexing issue is the Irish Border and it is related to customs arrangements.

One option is that may be considered is placing Northern Ireland under a separate customs regime by creating a customs border within the Irish Sea. However, this idea is being strongly opposed by the DUP, which is propping up the British government in a deal called “confidence and supply”. If a Brexit deal is achieved, it would drive the pound higher. The euro would also enjoy the same. However, the chances are that the EU and Britain would likely set a new Brexit deadline for November. Discussions on the second referendum option and a no-deal Brexit are on the cards. High market volatility can be expected during the meeting.

#13: China GDP (10/19/2018 Friday 02:00 GMT)

China’s GDP grew 6.7 percent on a year-on-year basis in the June quarter of this year, easing a little bit from the 6.8 percent growth in the first quarter. However, the reading for the quarter matched with analysts expectations. This is the weakest rate of expansion ever since the September quarter of 2016 as the trade tariff battle with the U.S. intensifies and effort] is being made to reduce financial risks and deleverage debt. Forecast for the third quarter of 2018: 6.6 percent expansion is on the cards

#14: Japan BoJ Governor Haruhiko Kuroda Speaks (10/19/2018 Friday 06:30 GMT)

Haruhiko Kuroda, Governor of the Bank of Japan, is scheduled to deliver brief remarks at the meeting of the Japanese Trust Banks Association. Markets often remain volatile during his speeches as traders make an attempt to understand the direction of interest rates.

#15: Canada CPI (10/19/2018 Friday 12:30 GMT)

In Canada, consumer prices fell by 0.10 percent on a month-on-month basis in August.

#16: Canada Core Retail Sales (10/19/2018 Friday 12:30 GMT)

In Canada, retail sales excluding autos rose by 0.9 percent on a month-over-month basis in July after the reading for the prior month was revised upward to represent a gain of 0.1 percent. The figure for the month beat analysts’ expectations for a 0.6 percent increase in retail trade.

#17: U.K. BoE Governor Mark Carney Speaks (10/19/2018 Friday 15:30 GMT)

Mark Carney, Governor of the Bank of England, is scheduled to speak at the luncheon at New York Economic Club. Markets often turn volatile during his speeches because traders make an attempt to understand the direction of interest rates.

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