Review of the main events of the Forex economic calendar for the next trading week (02.08.2021 – 08.08.2021)
While the major US stock indices ended the last week mostly neutral, the dollar fell. At the end of the trading day on Friday the DXY dollar index was 1% below its opening price at the beginning of the week.
Last Wednesday, the Fed officials kept the current parameters of monetary policy unchanged, signaling the need to further support the economy and continue stimulating measures. “Against the backdrop of progress in vaccination of the population and strong government support measures, indicators of economic activity and employment continue to grow stronger. The sectors most affected by the pandemic have shown some improvement, but have not yet fully recovered,” the central bank said.
Still, we probably should not be expecting a stronger decline in the dollar. One way or another, the US economy is recovering faster than other major world economies, maybe except China.
At the same time, the growing inflation in the United States, which shows the highest growth rates over the past almost 30 years, will sooner or later force the Fed leaders to pay attention to this and still start curtailing the stimulating policy. Most economists believe that the Fed will start this process earlier than, for example, the ECB. And this is one of the main reasons to give preference to the dollar.
It is also in demand as a defensive asset amid fears about the spread of the coronavirus, and continued positive macro data from the US provide additional support.
Next week, financial market participants will pay attention to the publication of important macro statistics from Germany, the US, New Zealand, Australia, the Eurozone, Canada, as well as the results of the meetings of the central banks of Australia and the UK. However, the focus of their attention will still be the publication on Friday of monthly data from the US labor market.
*during the coming week, new events may be added to the calendar and / or some scheduled events may be canceled
**GMT time
Monday, August 2
06:00 EUR Retail Sales in Germany
Retail sales is the main indicator of consumer spending in Germany, showing changes in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast: +2% in June against +4.2% (-2.4% y / y) in May, -2.0% (+4.4% y / y) in April, +7.7% ( +11% y / y) in March, +1.2% (-9.0% y / y) in February, -4.5% (-8.7% y / y) in January.
The data indicate the instability of the recovery of this sector of the German economy due to lockdowns. Better-than-expected data is likely to have a positive effect on the euro, but in the short term.
14:00 USD Manufacturing PMI (from ISM)
Published by the Institute for Supply Management (ISM), the US Manufacturing PMI is an important indicator of the health of the US economy as a whole. A result above 50 is seen as positive and strengthens the USD, one below 50 as negative for the US dollar. Forecast: 60.8 in July (against 60.6 in June, 61.2 in May, 60.7 in April, 64.7 in March, 60.8 in February, 58.7 in January, 60.7 in December). The index is above the 50 level and has a relatively high value, which is likely to support the dollar. The data above the value of 50 indicates an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast and, especially, below the value of 50, the dollar may sharply weaken in the short term.
Tuesday, August 3
04:30 AUD RBA’s decision on interest rate. RBA’s accompanying statement
In March 2020, the RBA made 2 rate cuts, bringing it to the level of 0.25%, and launched a quantitative easing program. At the same time, for the 3-year government bonds of Australia, the target level of yield is set at 0.25%. The RBA has launched a lending program for the banking system in the amount of at least A$ 90 billion.
In early November 2020, the RB of Australia lowered its key rate again, bringing it and its 3-year bond target to 0.10% from 0.25%, and announced A$ 100 billion quantitative easing program to support the incipient economic recovery.
The main negative factors for the Australian economy are weak wages growth, a weak labor market and a slowdown in growth. Annual inflation has remained below the 2-3% target set by the RBA for four years.
Unemployment in the country has remained above the 5% level for many years, unwilling to decline. Now the Australian economy is experiencing difficulties due to the coronavirus pandemic, which has hit the tourism and transport sectors hard.
It is expected that at this meeting the Central Bank of Australia will leave the rate at the current level of 0.1%, although unexpected decisions are not ruled out.
In an accompanying statement, the leaders of the RBA will explain the reasons for the decision on the rate. If the RBA signals the possibility of further easing of monetary policy in the near future, the risks of a fall in the Australian dollar will increase.
22:45 NZD Employment rate. Unemployment rate (data for the 2nd quarter)
The employment rate reflects the quarterly change in the number of New Zealand citizens employed. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for the NZD, while a low value is negative. Forecast: In the 2nd quarter, the number of employed citizens of New Zealand increased, and the employment rate increased by +0.7% (against an increase of +0.6% in the 1st quarter of 2021 and in the 4th quarter of 2020, a decrease -0.8% in the 3rd quarter, an increase of +0.7% in the 1st quarter of 2020 and a fall of -0.4% in the 2nd quarter).
Also at the same time, the Bureau of Statistics of New Zealand publishes a report on the unemployment rate – an indicator that estimates the ratio of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decline in the indicator is a positive factor for the NZD. Forecast: unemployment in New Zealand in the 2nd quarter was at the level of 4.5% (against 4.7% in the 1st quarter of 2021, 4.9% in the 4th quarter of 2020, 5.3% in the 3rd Q2, 4.0% in Q2, 4.2% in Q1 2020).
If other indicators of the NZ Bureau of Statistics report deteriorate, it is likely to negatively affect the NZD. Poorly forecast data will have an even stronger negative impact on the NZD.
Wednesday, August 4
01:30 AUD Retail Sales Index
The Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (for June) was -1.8%. If the data turns out to be weaker than the previous value, the AUD may sharply decline in the short term, but if it’s above the previous values, the AUD is likely to strengthen.
09:00 EUR Retail Sales in Eurozone
Retail sales is a major consumer spending indicator that shows the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast for June: +1.9% (+8.2% yoy) against +4.6% (+9.0% yoy) in May, -3.1% and +23.9% (in annual terms) in March, +3.0% and -2.9% (in annual terms) in February, -5.9% and -6.4% (in annual terms) in January. The data suggests that, despite the rise in indices, retail sales have not yet reached pre-coronavirus levels after a sharp drop in March-April 2020, when strict quarantine measures were in force in Europe. Nevertheless, better-than-expected data is likely to have a positive effect on the euro.
12:15 USD ADP National Employment Report
Typically, ADP’s private sector employment report has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. The growth in the number of workers in the US private sector in July is expected to be +721,000 (against an increase of 692,000 in June, 978,000 in May, 742,000 in April, 517,000 in March, 117,000 in February, 174,000 in January, a drop of -123,000 in December). The relative growth of the indicator may have a positive effect on the dollar quotes, while the relative decline in the indicator – negatively. Therefore, the market reaction may be negative, and the dollar may decline if the data turns out to be worse than forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. The bulk of layoffs were concentrated in tourism and retail. Other important sectors of the economy were also affected. ADP previously reported that the most significant drop in employment was recently observed in the construction and financial services sectors.
Although the ADP report does not directly correlate with the official US Labor Department data, which will be released on Friday, the ADP report is often a harbinger of it, having a noticeable impact on the market.
14:00 USD Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. These services sectors (as opposed to the manufacturing sector) have practically no impact on the country’s GDP.
In June, this indicator came out with a value of 60.1. A result above 50 is seen as positive for the USD. However, a relative decline in the index could negatively affect the dollar in the short term. Forecast for July: 60.4, which is likely to have a positive overall effect on the USD.
Thursday, August 5
01:30 AUD Balance of Trade
Balance of trade assesses the ratio between Australia’s exports and imports. Growth in exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. Previous value A$ 9.681 billion (May), A$ 8.028 billion (April), A$ 5.574 billion (March), A$ 7.529 billion (February). A decrease in the trade surplus may negatively affect the Australian dollar. Conversely, the growing trade surplus is a positive factor for the AUD. Forecast for June: AU$ 10.450 billion.
11:00 GBP Bank of England interest rate decision. Minutes of the meeting of the Bank of England. Planned volume of asset purchases by the Bank of England. Monetary Policy Report
In March (11 March and 19 March) 2020, during its extraordinary meetings, the Bank of England cut its interest rate twice, bringing it to the level of 0.1%, and announced its intention to purchase UK government bonds in the amount of 200 billion British pounds, trying to counteract economic damage from the coronavirus pandemic. The central bank announced an increase in its bond portfolio to £645bn, then to £745bn and to £895bn from £445bn at the time. “The current situation is completely unprecedented,” said Governor of the Bank of England Andrew Bailey during a press conference after an emergency meeting on March 19. Bailey said he expects a sharp economic contraction due to the coronavirus, and the Bank of England is ready to take further stimulus measures if necessary. “No, we are not done yet,” he said. Based on these statements by Andrew Bailey, it is fair to expect further actions from the Bank of England towards easing its monetary policy. It is possible that at this meeting the Bank of England will again undertake them, increasing the volume of purchases of bonds or lowering the interest rate. Although most economists believe that the Bank of England will refrain from these actions for now.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the distribution of votes “for” and “against” raising / lowering the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as with a large current account deficit in the UK balance of payments.
The intrigue about the further actions of the Bank of England remains. Both in the pound and the FTSE100 index, a lot of trading opportunities are provided during the period of publication of the bank’s decision on rates.
Also at the same time, the Bank of England’s monetary policy report will be published, containing an assessment of the economic outlook and inflation. At this time, the volatility in the pound quotes may rise sharply. Apart from GDP, one of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, is the inflation rate. If the tone of the report is soft, then the British stock market will receive support and the pound will decline. Conversely, the report’s tough rhetoric on curbing inflation, implying an increase in interest rates in the UK, will strengthen the pound.
11:30 GBP Speech by head of the Bank of England Andrew Bailey
Financial market participants expect Andrew Bailey to clarify the situation regarding the further policy of the UK central bank. Volatility during the speech of the head of the Bank of England usually rises sharply in the quotes of the pound and the London Stock Exchange FTSE index, if he gives any hints of tightening or easing of the Bank of England’s monetary policy. Probably, Andrew Bailey will also give explanations regarding the decision made by the Bank of England on the interest rate and will touch upon the state and prospects of the British economy after Brexit and the partial lifting of quarantine restrictions due to the coronavirus. If Bailey does not touch on monetary policy issues, the reaction to his speech will be weak.
23:00 AUD Speech by the head of the RBA Philip Lowe
In his speech, Philip Lowe will assess the current situation in the Australian economy and point out further plans for the monetary policy of the department.
Market participants would also like to hear Lowe’s views on central bank policy amid the ongoing coronavirus pandemic and Australia’s first recession in 30 years. According to Lowe, “there are no serious arguments in favor of tightening monetary policy in the short term,” and “it will be some time before interest rates rise.”
Any signals from him regarding a change in the plans of the RBA’s monetary policy will cause a sharp increase in volatility in the AUD and the Australian stock market. If he does not touch on the topic of monetary policy, the market reaction to his speech will be weak.
Friday, August 6
01:30 AUD RBA’s statement on monetary policy
The Statement on Monetary Policy provides an overview of economic and financial conditions and an assessment of risks to financial stability and sustainable economic growth. The statement is a kind of guideline for defining the RBA’s monetary policy plans. A tougher stance on the RBA’s monetary policy is seen as positive and strengthens the Australian dollar, while a more cautious stance is seen as negative for the AUD.
12:30 USD Average hourly wages. Non-farm payrolls. Unemployment rate
The most important indicators of the state of the labor market in the United States for July. Forecast: +0.3% (against + 0.3% in June, +0.5% in May, +0.7% in April, -0.1% in March, +0.2% in January and February , +0.8% in December, +0.3% in November) / +0.900 million (against +0.850 million in June, +0.559 million in May, +0.266 million in April, +0.916 million in March, +0.379 in February, +0.049 million in January, -0.140 million in December, +0.245 million in November, +0.638 million in October, +1.763 million in July and -20.687 million in April 2020) / 5.7% (against 5.9 % in June, 5.8% in May, 6.1% in April, 6.0% in March, 6.2% in February, 6.3% in January, 6.7% in December and November, 6.9% in October, 13.3% in May and 14.7% in April 2020), respectively.
In general, the indicators can be described as encouraging. The data speaks of continued improvement in the US labor market after plummeting in the first half of 2020. Prior to the coronavirus, the US labor market remained strong, signaling the stability of the American economy and supporting dollar quotes.
It is often difficult to predict the market reaction to the publication of indicators, because many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, because the economic situation in the United States and many other large economies remains controversial due to the coronavirus. In any case, when data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the entire financial market. The most cautious investors might choose to stay out of the market during this timeframe.
12:30 CAD Unemployment rate in Canada
Statistics Canada is to publish data on the country’s labor market for July. Unemployment has risen in Canada in recent months amid massive business closures due to coronavirus and layoffs. Unemployment rose from the usual 5.6% – 5.7% to 7.8% in March and already up to 13.7% in May 2020. If unemployment continues to rise, the Canadian dollar will decline. If the data turn out to be better than the previous value, the Canadian dollar will strengthen. A decrease in the unemployment rate is a positive factor for the CAD, an increase in unemployment is a negative factor. Unemployment is expected to be 7.7% in July (against 7.8% in June, 8.2% in May, 8.1% in April, 7.5% in March, 8.2% in February, 9.4% in January, 8.8% in December, 8.6% in November).
Price chart of GBPUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
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