Forex Major Currencies Outlook (July 13 – July 17)

USD 

ISM non-manufacturing index in June rebounded to an exquisite 57.1 from 45.4 the previous month. Business activity index came in at 66 which is the highest reading in almost a decade. New orders rose to 61.6 level. High 50s and low 60s indicate a recovery that may be more than just a simple reopening. On the down side, the employment index rose only to 43.1 level from 31.8 the previous month. Weekly jobless claims for the week ending July 3 came in at 1314k vs 1375k as expected. This is the first lower-than-expected reading in several weeks and continuing claims dropped to 18 million. The price of gold has breached the $1800 level for the first time since 2011 reaching a high of $1818. 

This week we will have inflation, consumption and housing data. 

Important news for USD: 

Tuesday:

• CPI

Thursday:

• Retail Sales

Friday:

• Housing Starts
• Building Permits 

EUR 

Retail sales in May rebounded 17.8% m/m from -12.1% m/m the previous month. The reading adds more to the view that April was the bottom and that economies are in the process of recovery after reopening. Compared to previous year retail sales are down -5.1% y/y. European Commission forecasts a deeper plunge in GDP than reported in spring. GDP for 2020 is now seen dropping -8.7% from -7.7% previously. Q2 GDP most likely fell by -13.5%. 

This week we will have industrial production and final June inflation data. EU’s ‘special summit’ in Brussels will be held on July 17 and member states are set to discuss coronavirus recovery plans. ECB will leave both the interest rate and the PEPP program unchanged. 

Important news for EUR: 

Tuesday:

• Industrial Production
• ZEW Economic Sentiment Index (EU and Germany)

Thursday:

• ECB Interest Rate Decision
• ECB Monetary Policy Press Conference

Friday:

• CPI
• EU Summit 

GBP 

Reports are circulating that BOE Governor Andrew Bailey has sent a letter to commercial banks preparing them for negative interest rates. The government has announced a £30bn stimulus package which amounts to almost 1.5% of GDP. Chancellor of Exchequer Rishi Sunak stated that their job is to protect and create jobs. They will pay £1000 bonus per employee that returns from furlough through to January. With almost 9 million people on furlough the program will amount to almost £9bn. The scheme will be designed so it pays firms to hire young people. VAT on hospitality and tourism will be cut from 20% to 5% for the next 6 months and in August there will be discount on for eating out from Monday to Wednesday. 

This week we will have May GDP data, as well as inflation and employment data. 

Important news for GBP: 

Tuesday:

• GDP
• Manufacturing Production
• Industrial Production

Wednesday:

• CPI

Thursday:

• Claimant Count Change
• Unemployment Rate

AUD

RBA has kept the official cash rate at 0.25% as widely expected. Statement showed that they will continue maintaining an accommodative approach for as long as necessary and there will be no increases in the cash rate until progress in employment and inflation is made. Economic conditions have recently stabilized but the economy is still going through a “very difficult period”. The bank is prepared to scale up bond purchases if needed. The meeting was non-eventful with a reiteration of the statement from previous month and no mention of AUD strength as AUDUSD is getting closer to 0.70 level.

CPI from China in June came in at 2.5% y/y on the back of rising food prices. PPI came in at -3% y/y still indicating deflationary pressures producers face which in turn will hurt industrial profits, however at least the reading is moving in the right direction after four months of increasing declines. Previous month’s reading was at -3.7% y/y.

This week we will have employment data from Australia as well as Q2 GDP, trade balance, consumption and industrial production data from China.

Important news for AUD:

Tuesday:

• Trade Balance (China)

Thursday:

• Employment Change
• Unemployment Rate
• GDP (China)
• Retail Sales (China)
• Industrial Production (China)

NZD

GDT price auction came in at huge 8.3% with whole milk powder rising 14%. This is a fourth consecutive auction of rising prices and the high reading pushed kiwi up in the markets which led NZDUSD to test the 0.66 level. Electronic card spending in June, an indicator for retail sales, came in at 16.3% m/m vs 15% m/m as expected.

This week we will have Q2 inflation data.

Important news for NZD:

Wednesday:

• CPI

CAD

Employment change in June came in at 952.9k vs 700k as expected and up from 289.6k in May. The unemployment rate dropped to 12.3%, although 12.1% was expected while the participation rate jumped to 63.8% from 61.4% the previous month. Participation rate is improving toward pre-pandemic levels, indicating that people are returning to work after the lockdown has been lifted. Full-time employment came in at 488.1k while part-time employment came in at 464.8k. Statistics Canada estimates that 3.1 million workers are now affected by lockdown from the peak of 5.5 million.

This week we will have BOC meeting where no change in the rate is expected.

Important news for CAD:

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

JPY

Wage data in May continued to deteriorate showing earnings at -2.1% y/y which in turn lead to household consumption plunging to -16.2% y/y. Household consumption has not risen since the sales tax hike in October of 2019. Declining wages and declining consumption add more downward pressure to Japan’s already deflationary climate. Core machinery orders, seen as a good proxy for capex in the coming months, came in at 1.7% m/m vs -5% m/m as expected and -16.3% y/y vs -16.8% y/y as expected. The rise in new orders was driven by the service sector. The reading is a rather volatile one but with current situation in the economy every positive reading is welcomed.

This week we will have BOJ meeting where no change in the rate is expected.

Important news for JPY:

Wednesday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement

CHF

Total sight deposits for the week ending July 3 came in at CHF687bn vs CHF683bn the previous week. SNB deemed that EURCHF is getting to close to the 1.06 level and decided to intervene in order to prevent Swissy’s appreciation. The unemployment rate in June declined to 3.3% after rising every month since February. This may indicate that Switzerland, from the labour market standpoint, is weathering the virus induced crisis quite well.

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_{Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}