Review of major economic events for the next trading week from 6/08/2018 to 10/08/2018
Trading on key Forex news: we are looking forward to the results of meetings of the central banks of Australia and New Zealand devoted to monetary policy issues, as well as the publication of data on GDP in the UK for the 2nd quarter. Traders will also watch the publication of data on the Canadian labor market for July.
The Fed also abstained from changes in its monetary policy last week. Fed leaders voted for this decision unanimously, however, in their statement the characteristic of growth of the American economy changed from "confident" to "strong".
The dollar strengthened after the Fed meeting. The dollar index DXY, which tracks the rate of the US currency against the basket of 6 other major currencies, rose on Wednesday by 0.12% to 94.46 and finished last week at 95.03, which corresponds to multi-month highs.
On Thursday, the Bank of England decided to raise the key interest rate to the highest level since 2009, and this is the second such increase over the decade. The Bank of England still decided to raise the rate by 0.25% to 0.75%. Most likely, the decision of the Bank of England to raise the interest rate was influenced by inflation data, which holds at 2.4%, which exceeds the target level of the Bank of England for inflation of no more than 2% per annum. Nevertheless, after a sharp increase immediately after the publication of the decision, the pound also fell sharply. As a result, over the past week, the GBP/USD pair slipped by 0.86%, falling below the level of 1.3000.
The July report on the US labor market published last Friday is likely to support the Fed's intention to raise the rate at the next meeting, which will be held in September. According to the Ministry of Labor, non-farm payrolls in July rose by 157,000, and unemployment fell to 3.9%. Unemployment is thus below the neutral level of 4.1% -4.7%. The dollar remains strong. Investors are waiting for further increase in interest rates of the Fed this year, and the likelihood of two more rate hikes by the end of the year is 72%. This is the highest probability, according to the CME Group.
As always, a number of important macroeconomic dataand several important news are expected to be published on the new trading week.
Monday, August 6
There are no important macroeconomic news planned.
Tuesday, August 7
07:30 (GMT+3) AUD Decision on the interest rate. Accompanying statement of the RBA.
Forecast: the rate will remain at the same level of 1.5%. As stated in the previous accompanying statements of the RBA, "strengthening of the Australian dollar will complicate the adjustment of the economy", and "maintaining rates unchanged corresponds to the goals in relation to GDP and inflation". If, in the subsequent accompanying statement, the RBA shows tough rhetoric about the economic forecast and the probability of an early rate hike, this will be a bullish signal for the AUD.
Interest rates may remain unchanged for an even longer period after 2018, given the weak wage growth and the slowdown in the Australian economy. "The RBA does not see any solid arguments in favor of adjusting the key interest rate in the short term," said one of the latest statements of the RBA.
Economists also warn that due to the weakness of the housing market and the continuing weakening of housing prices in major cities, the RBA will not change rates until 2020.
Wednesday, August 8
06:05 AUD Speech by the head of the RBA Philip Lowe.
Thursday, August 9
00:00 NZD The RBNZ's decision on the interest rate. Accompanying statement of the RBNZ.
The RB of New Zealand is deciding on the interest rate. The current interest rate in New Zealand is at 1.75%, remaining one of the highest in the world among advanced economies. And this attracts investors into almost safe purchases of the New Zealand currency that generates revenue, as well as traders using carry-trade strategies, when a more expensive currency is bought for a cheaper one. It is widely expected that at this meeting, the interest rate will remain at the same level of 1.75%.
In the accompanying statement, the RBNZ will explain the decision on the interest rate and comments on the economic conditions that contributed to the adoption of this decision.
At this time, volatility in the New Zealand dollar trade is high.
01:00 NZD The RBNZ press conference.
Earlier, the RBNZ stated that against the backdrop of "a multitude of uncertainties", the monetary policy "will remain soft for the foreseeable future", but it "can be adjusted accordingly". For a stable recovery of the New Zealand economy and rising inflation, "a lower New Zealand dollar rate is needed".
It is likely that the head of the RBNZ Adrian Orr will again confirm the bank's propensity to pursue a soft monetary policy, which will result in continued pressure on the New Zealand currency.
In any case, the volatility in the New Zealand dollar trade is expected to grow during the RBNZ press conference.
Friday, August 10
04:30 AUD The RBA's Statement on Monetary Policy.
Tough rhetoric about further plans for monetary policy is a bullish factor for the AUD. But the RBA may revise the short-term forecasts of core inflation downward. For the Reserve Bank of Australia, this means that the interest rate should remain unchanged for a longer period. The markets are now expected to see the next rate increase at the end of 2018, and maybe even in 2019. Economists also warn that due to the weakness of the housing market and the continuing weakening of housing prices in major cities, the RBA will not change rates until 2020. This is a negative factor for the AUD.
11:30 GBP GDP for the 2nd quarter (preliminary release).
GDP is considered an indicator of the overall state of the British economy. The growing GDP trend is considered positive for the GBP. The GDP indicator remains one of the highest in the world in annual terms, although its growth slowed down after the referendum on Brexit held in late June 2016. An annual increase of + 1.2% and a quarterly increase of + 0.1% are expected, which is lower than the previous value (+ 0.2%). This is a negative factor for the GBP.
Simultaneously with the quarterly report, a monthly report on GDP will also be released (for June). In May, GDP growth was + 0.3%.
15:30 CAD Change in the number of employed citizens in Canada. Unemployment rate in Canada.
Statistics Canada will publish the data for July. Previous value was at +31800 employees (in June). The forecast: +24000 employed citizens. If the growth in the number of employees in July is weaker than the forecast, the Canadian dollar may react with a decline.
Unemployment in June was 6.0%. If the unemployment increases, the Canadian dollar will decrease. If the data prove to be better than the forecast, the Canadian dollar will strengthen. Forecast: the unemployment rate in July was 5.8%.
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