Review of the main events of the Forex economic calendar for the next trading week (01.08.2022 – 07.08.2022)
As we can see, the dollar ended the last week of July in the negative territory. Despite a tough decision by the Fed last Wednesday regarding the current monetary policy and no less tough statements by the leaders of the US central bank that it “would be appropriate” to further increase the rate, the dollar decreased.
“Another unusually large rate hike could be appropriate at the next meeting,” Fed chief Jerome Powell confirmed the Fed’s tough intentions at a post-meeting press conference, as “inflation is well above target.”
On Thursday, dollar buyers had to swallow another bitter pill after the publication of the report by the US Bureau of Economic Analysis with data on GDP for the 2nd quarter. It declined contrary to a modest forecast of growth of +0.5% after falling by -1.6% in the 1st quarter of 2022.
And this means that the American economy has entered a recession. This is not yet stagnation or stagflation, but the situation is frankly alarming.
“We expect a period of economic growth below the trend,” and the whole process will be accompanied by a period of “lower economic growth, weakening the labor market,” Powell said at a Fed press conference on Wednesday.
If so, tightening monetary policy by raising interest rates in a recession would be suicidal for the US economy.
It is possible that soon, and even before the end of this year, the Fed will have to move again from tightening to easing its monetary policy, especially since during the midterm elections to Congress, which will be held in early November, Biden and the Democrats will have to do explain to the Americans the sharp deterioration in the economy.
Until November, there is still time to do something and at least start to rectify the situation.
And next week, market participants will be waiting for the publication (on Friday) of the monthly report with data on the US labor market for July. If everything is bad, then a deeper correction in the dollar cannot be avoided.
Among other important events of the upcoming week, market participants will pay attention to the publication of important macro statistics from Australia, New Zealand, the Eurozone, the US, Canada, as well as the results of meetings of the central banks of Australia and the UK on monetary policy issues.
*) during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, August 1
In Switzerland, Australia, and Canada, August 1 is a public holiday. The banks of these countries will be closed, which will affect the trading volumes: they will be lower than usual.
06:00 EUR Retail sales in Germany
Retail sales is the main indicator of consumer spending in Germany showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Previous values: +0.6% (-3.6% yoy) in May, -5.4% (-0.4% yoy) in April, -0.1% (-2.7% year-on-year) in March, +0.3% (+7.0% year-on-year) in February, +2.0% (+10.3% year-on-year) in January 2022.
The data speaks of the instability of the recovery of this sector of the German economy. Data better than the forecast and / or the previous value is likely to have a positive impact on the euro, but only in the short term. Forecast for June: +0.2% (-8.0% in annual terms).
14:00 USD Manufacturing PMI (from ISM) of the US economy
The US Manufacturing PMI published by the Institute for Supply Management (ISM) is an important indicator of the state of the US economy as a whole. A result above 50 is considered positive and strengthens the USD, one below 50 is considered negative for the US dollar. Forecast: 52.0 in July (against 53.0 in June, 56.1 in May, 55.4 in April, 57.1 in March, 58.6 in February, 57.6 in January). The index is above the level of 50 and, despite the relative decline, has a relatively high value, which is likely to support the dollar. 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 2
04:30 AUD RBA’s interest rate decision. RBA’s accompanying statement
The main negative factors for the Australian economy are weak wages growth, a weak labor market and a slowdown in growth. However, Australia’s economic recovery is accelerating. The government of the country expects that in the 2022-23 financial year, the country’s economy will grow by + 3.5%, the unemployment rate will fall to a minimum since the early 1970s (in April, unemployment in Australia fell to 3.9%, the lowest since August 2008) and wages will increase by about 3.25%. This, in turn, will allow the Reserve Bank of Australia to continue on the course of monetary policy normalization it launched in May by raising interest rates for the first time since November 2010. To curb inflation, which reached a 20-year high (in Q1 2022, Australian headline annual consumer price inflation was 5.1% and core inflation was 3.7%), the rate was increased by 0.25%, to 0.35%, and then to 0.85% and to 1.35% (in June 2022), which exceeded economists’ forecasts. In addition, the RBA signaled the likelihood of a further increase in the coming months.
“The Board will do everything necessary to ensure that over time, inflation in Australia returned to the target level – said the governor of the central bank Philip Lowe. – This will require further interest rate hikes in the future.”
According to the RBA forecast, in 2022 headline inflation will be at the level of 6%, while core inflation will accelerate to 4.75%. At the same time, the unemployment rate next year may fall to 50-year lows.
“With the move towards full employment and data on prices and wages, some scaling back of the emergency monetary support provided during the pandemic is appropriate,” Lowe said.
Economists now expect the RBA to raise its key rate to 2.6% by December 2022 and keep it at that level next year.
Thus, the Australian dollar received an impulse to grow. As you know, (under normal economic conditions) an increase in the interest rate usually leads to the strengthening of the national currency.
It is possible that at this meeting the Central Bank of Australia will again raise the interest rate, although unexpected decisions are possible, for example, a decrease or a stronger increase in the interest rate.
In an accompanying statement, the RBA officials will explain the reasons behind the rate decision. If the RBA signals the possibility of easing monetary policy in the near future, the risks of the fall of the Australian dollar will increase. And, on the contrary, tough rhetoric of the RBA’s accompanying statement may provoke the strengthening of the Australian dollar.
22:45 NZD Employment rate. Unemployment rate (data for the 2nd quarter)
The employment rate reflects the quarterly change in the number of employed New Zealanders. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for NZD, while a low value is negative. Forecast: in the 2nd quarter of 2022, the employment rate increased by +0.4% (against +0.1% growth in the 1st and 4th quarters, +2.0% in the 3rd quarter, +1.0% in the 2nd quarter, +0 .6% in Q1 2021).
Also at the same time, the New Zealand Bureau of Statistics publishes a report on the unemployment rate – an indicator that assesses 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 decrease in the indicator is a positive factor for the NZD. Forecast: New Zealand unemployment in Q2 2022 was at 3.1% (against 3.2% in Q1 and Q4, 3.4% in Q3, 4.0% in Q2, 4.7% in Q1 2021).
If other indicators of the report of the NZ Bureau of Statistics come out with a deterioration, this is likely to negatively affect the NZD. Worse-than-expected data will have an even stronger negative impact on the NZD.
Wendesday, August 3
09:00 EUR Retail sales in the Eurozone
Retail sales is the main indicator of consumer spending showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. June forecast: +0.1% (-1.6% yoy) against +0.2% (+0.2% yoy) in May, -1.3% (+3.9% yoy) yoy) in April, -0.4% (+0.8% yoy) in March, +0.3% (+5.0% yoy) in February, +0.2% (+7.8% in annual terms) in January. The data suggests that, despite rising indices, retail sales have not yet reached pre-coronavirus levels after a sharp drop in March-April 2020, when tight quarantine measures were in place in Europe. However, better-than-expected data is likely to have a positive impact on the euro.
14:00 USD Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. These services sectors (unlike the manufacturing sector) have virtually no impact on the country’s GDP.
A result above 50 is seen as positive for the USD. Forecast for July: 53.5 (against 55.3 in June, 55.9 in May, 57.1 in April, 58.3 in March, 56.5 in February, 59.9 in January, 62.0 in December), which is likely to have a generally positive impact on the USD. However, the relative decline of the index, and especially below the value of 50, may negatively affect the dollar in the short term.
Thursday, August 4
01:30 AUD Balance of trade
The indicator (balance of trade) evaluates the ratio of exports and imports. The growth of exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. Previous values 15.965 billion Australian dollars (for May), 10.495 billion Australian dollars (for April), 9.314 billion Australian dollars (for March), 7.457 billion Australian dollars (for February), 12.891 billion Australian dollars (for January). A decrease in the trade surplus may have a negative impact on the Australian dollar. Conversely, a growing trade surplus is positive for the AUD. Forecast for June: 14.200 billion Australian dollars.
11:00 GBP Bank of England’s interest rate decision. Minutes of the meeting of the Bank of England. The planned volume of asset purchases by the Bank of England. Monetary Policy Report
Following the results of the December meeting, the Bank of England unexpectedly raised its key interest rate to 0.25%, becoming the first leading central bank to increase the cost of borrowing since the start of the coronavirus pandemic. In February, the interest rate was raised to 0.50%, in March to 0.75%, in May to 1.00%, and in June to 1.25%. Members of the Monetary Policy Committee considered it appropriate to increase the cost of borrowing in a strong labor market to contain price increases. At the same time, further tightening of monetary policy may be required to bring inflation to the target level of 2.0%.
It is possible that at this meeting the Bank of England will again raise the interest rate (up to 1.50%), while maintaining the volume of purchases of government bonds at the same level of 895 billion pounds. However, despite the positive macro data from the UK, the interest rate may remain at the same level of 1.25%, amid the situation in Ukraine. Such a decision could cause a weakening of the pound.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the votes “for” and “against” the increase / decrease in 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’s balance of payments.
The intrigue about the further actions of the Bank of England remains. And in trading the pound and FTSE100 index futures, there are plenty of trading opportunities during the publication of the bank’s rate decision.
Also at the same time we expect the report of the Bank of England on monetary policy containing an assessment of economic prospects and inflation. At this time, the volatility in the pound quotes can rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the inflation rate. If the tone of the report is soft, then the British stock market will receive support, and the pound will fall. Conversely, the report’s tough rhetoric on curbing inflation, implying a further increase in the interest rate in the UK, will lead to a strengthening of the pound.
11:30 GBP Speech by head of the Bank of England Andrew Bailey
Financial market participants are expectingAndrew Bailey to clarify the situation regarding the future policy of the UK central bank. Volatility during speeches by the head of the Bank of England usually rises sharply in the quotes of the pound and the FTSE London Stock Exchange index if he gives any hints of tightening or easing monetary policy of the Bank of England. Probably, Andrew Bailey will also give explanations regarding the decision taken by the Bank of England on the interest rate and touch upon the state and prospects of the British economy after Brexit against the backdrop of a sharp rise in energy prices and inflation. If Bailey does not touch on monetary policy issues, the reaction to his speech will be weak.
Friday, August 5
01:30 AUD RBA’s monetary policy statement
The monetary policy statement provides an overview of economic and financial conditions and an assessment of the risks to financial stability and sustained economic growth. The statement is, in a way, a guideline for determining the RBA’s monetary policy plans. RBA’s tougher stance on the 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 US in July. Forecast: +0.3% (against +0.3% in June, May and April, +0.4% in March, 0% in February, +0.7% in January 2022, +0.6% in December, +0.3% in November, +0.4% in October, +0.6% in September and August 2021) / +0.250 million (against +0.372 million in June, +0.390 million in May, +0.428 April, +0.431 million, +0.678 million in February, +0.467 million in January 2022, +0.199 million in December, +0.210 million in November, +0.531 million in October, +0.194 million in September, +0.235 million in August 2021) / 3.6% (against 3.6% in June, May, April and March, 3.8% in February, 4.0% in January 2022, 3.9% in December, 4.2 % in November, 4.6% in October, 4.8% in September, 5.2% in August 2021), respectively.
In general, the figures can be described as encouraging. The data shows continued improvement in the US labor market after its precipitous fall in the first half of 2020. Before the coronavirus, the US labor market remained strong, indicating the stability of the US economy and supporting the dollar quotes.
Predicting the market reaction to the publication of indicators is often difficult, 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 US and many other major economies remains controversial due to the coronavirus. In any case, when the data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the financial market. Probably the most cautious investors will prefer to stay out of the market during this period of time.
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, including against the backdrop of massive business closures due to the coronavirus and layoffs. Unemployment rose from the usual 5.6% – 5.7% to 7.8% in March and already to 13.7% in May 2020. If unemployment continues to rise, the Canadian dollar will decline. If the data turns out to be better than the previous value, the Canadian dollar will strengthen. Decreasing unemployment rate is a positive factor for the CAD, rising unemployment is a negative factor. In June 2022, unemployment was at 4.9% (against 5.1% in May, 5.2% in April, 5.3% in March, 5.5% in February, 6.5% in January 2022 ). Forecast for July 2022: 5.0%.
Price chart of GBPUSD in real time mode
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