Trading on key Forex news: we are expecting the publication of data on China's GDP for the 2nd quarter, minutes from the last meeting of the RBA, inflationary consumer price indices in the UK, the Eurozone, and Canada

The result of last week was the strengthening of the dollar. After massive sell-offs on stock markets on Wednesday, Thursday and Friday, investors tried to reassess the consequences of the escalating trade conflict between the US and China. After the White House announced its intention to additionally impose a 10% duty on Chinese goods worth $200 billion, the Ministry of Commerce of China replied that they were shocked by the behavior of the White House and are ready to take retaliatory measures against the United States. In this situation, the dollar is a protective asset. Nevertheless, the threat of escalation of trade contradictions between the US and China has now come to the fore. US Finance Minister Stephen Mnuchin on Thursday rejected the possibility of consequences of the introduction of duties announced by the administration of US President Donald Trump. Mnuchin said that the US economy will not suffer as a result of these duties.

The producer price index rose in June, which was another sign of increased inflationary pressures in the US. The PPI index, which displays the cost of goods and services companies, rose by 0.3% in June.
Compared to the same period of the previous year, PPI in June grew by 3.4%, which was the strongest annual growth since November 2011.
The consumer price index in June increased by 2.9% compared to the same period of the previous year, thus showing the strongest growth since 2012.
The dollar index DXY reflecting the value of the dollar against the basket of the six major currencies rose by 0.79% (74 points) to 94.44 at the end of the week.
The overall positive dynamics of the dollar and DXY persists amid the Fed's inclination to further tighten monetary policy and positive macro data indicating the acceleration of the growth of the US economy.
The focus of traders this week will be on the publication of data on China's GDP for the 2 nd quarter, the minutes from the last RBA meeting, and inflationary consumer price indices in the UK, the Eurozone, and Canada.

As always, a number of most important macroeconomic data and some important news are expected to be published this new trading week.

Monday, July 16

05:00 (GMT+3) CNY GDP for the 2nd quarter (second estimate).

The National Bureau of Statistics of China will provide data on GDP growth in the second quarter.  

In the previous quarter, GDP growth was + 1.4%. It is expected that China's GDP grew by 1.6% in the second quarter (+ 6.7% in annual terms against + 6.8% in the 1st quarter). China is the largest purchaser of primary commodities and the supplier of the ready-made products of the widest range to the world commodity market. The economy of China is the second largest in the world after the US. Therefore, the publication of important macroeconomic indicators from China can have a strong impact on the entire financial market.
The growth of the index will positively affect the Chinese yuan, as well as the global and, primarily, Asian stock indices, as well as the quotations of commodity currencies, such as the New Zealand and Australian dollars.
China is the largest trade and economic partner of Australia and New Zealand and a buyer of commodities from these countries.
Therefore, positive macro statistics from China is also positively reflected in the quotations of these commodity currencies.

15:30 USD Retail sales (ex autos). Retail Control Group

This report (Core Retail Sales Ex Autos) reflects the total sales of retailers of all sizes and types, excluding car dealers. The change in sales in the retail sector is the main indicator of consumer spending. The report is leading, and further data can be heavily revised. A good result strengthens the US dollar, a bad one weakens it. Forecast: + 0.4% (against + 0.9% in May). 
Retail sales are the main indicator of consumer spending in the US showing a change in sales in the retail sector. The indicator Retail Control Group estimates the volume in the entire retail industry and is used to calculate price indices for most commodities. A strong result strengthens the US dollar, and conversely, a weak report weakens the dollar. Forecast: the volume of retail trade in the USA increased in June by 0.4% (against + 0.5% in May).

Tuesday, July 17

01:45 NZD CPI q / q

The Consumer Price Index (CPI) is a key indicator for assessing inflation and reflects the dynamics of retail prices for a group of goods and services that make up the consumer basket. A positive result strengthens the NZD, negative one weakens it. Forecast: + 0.5% (vs. + 0.5% in the 1st quarter)

03:30 AUD Monetary Policy Meeting Minutes

Minutes from the last meeting of the RB of Australia, which is published two weeks after the meeting and the decision on the interest rate. If the RBA assesses the state of the labor market and the GDP growth rate in the country positively, and also displays a hawkish attitude toward the inflation forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The bank's soft rhetoric regarding, above all, inflation puts pressure on the AUD.
Market participants believe that the RBA will not raise interest rates until mid-2019. Salaries continue to grow slowly, and household debt has risen to a record high, which also postpones raising interest rates to a more distant future.
According to the head of the RBA Philip Lowe, "there are no serious arguments in favor of tightening monetary policy in the short term". In his opinion, "some time will pass before the rate is raised".

11:30 GBP Wages report for the last 3 months

Monthly, the Office for National Statistics of Great Britain (ONS) publishes a report on average earnings, including the period of the last 3 months, with and without bonuses.
This report is a key short-term indicator of the dynamics of changes in the wage level of employees in the UK. The increase in wages is a positive factor for GBP, while the low value of the indicator is negative. Forecast: the report for May assumes that average wages, including bonuses, increased by 2.5% in the last 3 months (as well as in the previous month); without bonuses - by 2.7% (against + 2.8% in April). If the data prove to be better than the forecast, the pound is likely to strengthen on the foreign exchange market.

17:00 USD Speech by the Fed Chairman Jerome Powell

Powell's comments may affect both short-term and long-term trade in the USD. A more hawkish position on the monetary policy of the Fed is seen as positive and strengthens the US dollar, while a more cautious one is estimated as negative for the USD. Any hints Powell may give on the possibility of a sooner increase in the interest rate will cause the strengthening of the dollar and the fall of the US stock markets.
Investors want to hear his opinion on the possibility of 4 rate increases this year.

Wednesday, July 18

11:30 GBP CPI

The consumer price index (CPI) reflects the dynamics of retail prices for a group of goods and services that are part of the British consumer basket. The CPI index is a key indicator of inflation. Its publication causes major movements of the pound on the foreign exchange market and the FTSE100 index of the London stock exchange.
As expected, annual inflation in June rose by 0.2% (+ 2.6% in annual terms). In the previous month: + 0.4% and + 2.4%, respectively.
The sharp drop in the British pound after the referendum on Brexit contributed to the growth of inflation to current values. The sharp increase in inflation in the country gives grounds to assume that the Bank of England can again return to the question of raising the interest rate in the UK. And this is a positive factor for the pound. Values ​​below the forecast can trigger a weakening of the pound.

12:00 EUR Consumer Price Index (CPI). Core CPI (later release)

This indicator is published by the Eurostat and determines the change in the prices of the selected basket of goods and services for a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the EUR, a negative result weakens it.
Forecast: in June, CPI (in annual terms) increased by 2.0% (against + 1.9% in the previous month), which should positively affect the euro.
Forecast: in June, core index (Core CPI) increased (in annual terms) by 1.0% (against + 1.1% in the previous month). This is a negative factor for the euro.

17:00 USD Speech by the Fed Chairman Jerome Powell

Powell's comments may affect both short-term and long-term trade in the USD.

Last Thursday, Powell expressed a negative opinion on the increase in import duties in the US, saying that "lower duties would be positive for the economy, higher ones would be negative". Nevertheless, investors will follow the rhetoric of Powell's speech to catch additional signals about the monetary policy of the Fed.

A more hawkish position on the monetary policy of the Fed is seen as positive and strengthens the US dollar, while a more cautious one is estimated as negative for the USD. Any hints Powell may give on the possibility of a sooner increase in the interest rate will cause the strengthening of the dollar and the fall of the US stock markets.
Investors want to hear his opinion on the possibility of 4 rate increases this year.

Thursday, June 19

04:30 AUD Employment rate. Unemployment rate

The employment rate reflects the monthly change in the number of employed citizens of Australia. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value of the indicator is a positive factor for AUD, and a low value is negative. Forecast: in June, the number of employed citizens in Australia increased by 17,000 people (against +1200 people in May). 
At the same time, the Australian Bureau of Statistics publishes a report on unemployment - an indicator that measures the proportion of unemployed population to the total number of able-bodied citizens. The growth of the indicator shows weakness of the labor market, which leads to a weakening of the national economy. A decrease in the index is a positive factor for AUD. Forecast: unemployment in Australia in June remained at the same level of 5.4%.
In general, the indicators can be referred to as positive for the AUD. If the values ​​of the indicators prove to be worse than the forecast, the Australian dollar will decrease.

Friday, July 20

15:30 CAD Consumer price index. Retail sales

The consumer price index (CPI) reflects the price dynamics in relation to the retail prices of the relevant basket of goods and services. The target inflation rate for the Bank of Canada is in the range of 1% -3%. The growth of the CPI is a precursor of the rate increase and a positive factor for the CAD. Forecast: in June, consumer prices rose in Canada by 0.3% (against + 0.1% in May). If the data coincides with the forecast or is better, the CAD will grow.
Retail sales (ex autos) are often considered an indicator of consumer confidence, which reflects the state of the retail sector in the short term. The growth of this indicator is a bullish factor for the CAD. Forecast: in March, retail sales grew by 0.2% (against a decrease of 0.1% in February), which should positively affect the quotations of the CAD.

15:30 CAD Retail sales. Basic Consumer Price Index in Canada

Retail sales are often considered an indicator of consumer confidence, which reflects the state of the retail sector in the short term. The growth of this indicator is a bullish factor for the CAD. Forecast: in May, the growth in the level of retail sales was 0% (versus a decrease of -1.2% in May), which should negatively affect the CAD quotes when the forecast is confirmed.
The Core CPI by the Bank of Canada reflects the dynamics of the retail prices of the relevant basket of goods and services (excluding fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transport, and tobacco products). The target inflation rate for the Bank of Canada is in the range of 1%-3%. The growth of the CPI is a precursor of the rate increase and a positive factor for CAD. Forecast: in June, consumer prices rose in Canada by 1.4% (against + 1.3% in May) in annual terms. If the data are worse than the forecast, this will negatively affect the CAD.

 

Real-time price chart of GBPUSD

Economic calendar for the week 16.07 - 22.07.2018

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.

Need to ask the author a question? Please, use the Comments section below. .
Start Trading
Follow us in social networks!
Live Chat
Leave feedback