Forex Major Currencies Outlook (July 27 – July 31)

USD 

Existing home sales came in at 4.72m in June for a record breaking 20.7% m/m rise from 3.91m in May. Record-low mortgage rates led to return of buyers into the market. Single-family sales rose by 20% while condominium sales surged by 29%. Prices were little affected by the pandemic. Initial jobless claims for the week ending July 18 came in at 1416k vs 1300k as expected. Previous week showed claims of 1307k so this is the first rise after 15 consecutive weeks of falling claims. The reading brings total amount of reported claims since late March to 52.7 million. Continuing claims have continued their decline to 16197k. The $600 a week help for the unemployed will expire on July 31. Gold went over $1890 level, the highest it got since September of 2011 and is getting closer to the all-time high level of $1920. 

This week we will have preliminary Q2 GDP reading as well as PCE inflation and personal spending data. FOMC meeting is not expected to produce rate changes or changes in their QE program, but as always, the tone will be heavily scrutinized. 

Important news for USD: 

Wednesday:

• Fed Interest Rate Decision
• FOMC Press Conference

Thursday:

• GDP

Friday:

• PCE
• Personal Spending 

EUR 

After four long days of talks European leaders agreed to a package of €750 billion in grants and loans. Agreed division of funds shows €390bn in grants and €360bn in loans. With this move, the debt burden is shared among the members which could strengthen to Union and propel EUR higher. Additionally, the European leaders agreed upon the seven-year budget spanning from 2021 to 2027. 

Preliminary PMI data for July showed improvements across all readings putting them back into expansion territory. Manufacturing PMI came in at 51.1 on the back of strong German reading that returned to 50 level. Services PMI came in at 55.1 with German coming in at 56.7 and French at 57.8 indicating reactivation of services industry after the lockdown. Composite PMI came in at 54.8 with German at 55.5 and French at 57.6. Markit noted that the output grew at the fastest rate in more than over two years in July. However, the concern is that the recovery could falter after this initial revival. 

This week we will have sentiment data as well as preliminary Q2 GDP reading and preliminary July inflation data. 

Important news for EUR: 

Thursday:

• Economic Sentiment Indicator
• Services Sentiment Indicator

Friday:

• GDP
• CPI

GBP

Retail sales in June rebounded 13.9% m/m vs 8.3% m/m as expected. Much better than expected and a positive reading given that consumption almost returned to the levels from previous year with yearly retail sales coming in at -1.6% y/y. Ex autos, fuel category shoot almost double over expectations coming in at 13.5% m/m vs 7.9% m/m as expected. Preliminary July PMI numbers smashed expectations with manufacturing coming in at 53.6 vs 52 as expected, services at 56.6 vs 51.5 as expected and composite at 57.1 vs 51.7 as expected. Markit noted that numbers present step in the right direction, but there is still a lot of work to be done before the sustainable recovery is in sight.

Relationship with China has deteriorated after the UK cancelled its extradition treaty with Hong Kong. China vowed to retaliate on this topic and also in response to Britain's decision to phase out Hauwei technology. One of the moves China took was to block broadcast of Premier League matches on its territory. EU chief negotiator Barnier stated that EU and UK are still far away in the negotiations regard post-Brexit trade relationship adding that there is an objective risk of no deal.

AUD

RBA minutes from July meeting showed resolution from board members to keep easy monetary policy for as long as needed. They also agreed that there is no need to adjust the package of already implemented measures. Board members stated that there is no case for intervention in the foreign exchange market, given its limited effectiveness when the exchange rate is broadly aligned with its fundamental determinants. This means that they are satisfied with current AUD level and will not fight to keep it from strengthening further. Governor Lowe stated that he would like to see lower AUD but will not going to intervene to lower it. He also stated that the board has reviewed alternative monetary policy options but ultimately decided on no change, however they are not ruled out in the future.

This week we will have Q2 inflation data from Australia as well as official July PMI data from China.

Important news for AUD:

Wednesday:

• CPI

Friday:

• Manufacturing PMI (China)
• Non-Manufacturing PMI (China)
• Composite PMI (China)

NZD

RBNZ stated that domestic financial markets have stabilized, therefore they have reduced liquidity interventions from daily to weekly. GDT price auction came in at -0.7%. The fall in prices is the first after four-consecutive positive auctions. NZDUSD has been shooting higher all week on the back of positive risk sentiment in the markets, reaching the 0.67 level. Trade balance showed a decline in surplus to NZD426m from NZD1286m previous month on the back of falling exports and rising imports. The data will give a small blow to Q2 GDP reading.

This week we will have ANZ business confidence, a closely followed metric by RBNZ.

Important news for NZD:

Thursday:

• ANZ Business Confidence

CAD

Retail sales for May rebounded 18.7% m/m from -25% m/m in April, however expectations were for a rebound of 20% m/m. Ex autos category came in at 10.6% m/m vs 11.9% m/m as expected. Sales were up in 10 out of 11 sub sectors. Motor vehicle and parts dealers, general merchandise stores, as well as clothing and clothing accessories stores were the main contributors with food and beverage stores being the only negative sub sector.

Headline inflation for June came in at 0.7% y/y up from -0.4% y/y in May. Prices rose in 5 of the 8 major components with food and shelter prices contributing the most to the increase in the CPI. Prices for goods declined by less than the previous month. Common and trimmed core measures of CPI improved to 1.5% y/y and 1.8% y/y respectively while median CPI stayed the same at 1.9% y/y.

This week we will have May GDP data.

Important news for CAD:

Friday:

• GDP

JPY

Trade balance in June came in at -JPY268.8bn vs -JPY11.9bn as expected. Exports have missed expectations and came in at -26.2% y/y, a 19^th straight monthly drop, indicating a prolonged slowdown in global demand while imports came in at -14.4% y/y. Japanese exports account for around 15-18% of GDP. Exports to China, Japan’s biggest trading partner, came in at -0.2% y/y while exports of cars to China rose 18.8% y/y. Exports to the US came in at -46.6% y/y, an 11^th straight monthly drop.

National inflation data for the month of June continued to show the same decade-long absence with the headline number coming in at 0.1% y/y. Excluding fresh food category came in flat, at least coming back from -0.2% y/y the previous month, while excluding fresh food, energy category came in at 0.4% y/y. Preliminary PMI data in July improved a bit compared to the previous month but still in the contraction territory. Manufacturing came in at 42.6, services at 45.2 while composite rose to 43.9 from 40.8 the previous month. Q3 data begins with a sluggish improvement.

This week we will have consumption, employment and preliminary June industrial production data.

Important news for JPY:

Thursday:

• Retail Sales

Friday:

• Unemployment Rate
• Industrial Production

CHF

Total sight deposits for the week ending July 17 came in at CHF691.5bn vs CHF688.6bn the previous week indicating SNB activity in the forex market to fight off Swissy’s strength.

This week we will have consumption data.

Important news for CHF:

Friday:

• Retail Sales

_{You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT+3 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.}

_{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.}