With the US Federal Reserve continue maintaining its silence about the next rate-hike, and the Q2 2016 GDP showing lesser than expected growth figure, disappointments dragged the US Dollar Index (I.USDX) down during last week. The downturn not only forced the greenback to erode its previous weekly gains but also printed a first in three month negative closing on the face of it. On the other hand, the Japanese Yen surged across the board, even with the PM's mammoth fiscal measures, as the Bank of Japan didn't adhere to market consensus & announced fewer than expected monetary measures. Further, the EUR and GBP enjoyed upbeat Inflation and growth figures respectively while the AUD & NZD remained strong with rising commodity prices. However, the CAD needed to bear the burden of weaker Crude prices and the Gold prices merrily welcomed the second consecutive monthly advance.
Moving forward, the first week of August has many important details/events to propel the global market volatility which started with Monday's Manufacturing PMIs from China & UK. Amongst the rest, central bank meetings of Bank of England (BoE) and the Reserve Bank of Australia (RBA), job details from US, Canada and New-Zealand and headline PMIs from UK are likely to keep offering busy trading schedules to market players. Let's quickly examine them.
US NFP To Portray Near-Term USD Trend
Following not-so-impressive release of the US GDP and a neutral tone from last week's FOMC, New York Fed President William Dudley, an important member of the Fed, said on Monday that he sees only one rate-lift form the Fed till 2017-end and perceives greater risk from Brexit over the US economy. The comment, even if failed to receive quick action, might force USD traders to closely examine July month job numbers, up for Friday release, in order to foresee near-term greenback trend. Moreover, ISM Manufacturing & Non-Manufacturing PMIs, to be released on Monday & Wednesday respectively, followed by the Thursday's Factory Orders, are some additional data-point that could provide intermediate moves to the US Dollar.
Unlike the previous month, when NFP surprised global markets and reversed the disappointed marks of May, Friday's job readings are more likely to favor the recent USD downturn as the NFP is expected to print 180K against 287K. However, the Unemployment-rate might show 4.8% number compared to 4.9% prior and the Earnings can advance with 0.2% growth versus 0.1% previous. Further, the ISM Manufacturing and Non-Manufacturing Indices seem also cooled down to 53.1 & 56.00 from their 53.2 & 56.5 respective priors while the Factory Order is expected to indicate extended contraction of -1.8% against -1.0%. Additionally, Wednesday's ADP Non-Farm Employment Change, an early signal for NFP, also bears the soft consensus of registering 171K versus 172K previous.
As majority of the July month details continue raising bars for the expectations of a Fed's rate-hike in 2016, chances of further downside by the US Dollar can't be denied; however, a surprise improvement in Job numbers can help pare some of its recent losses.
GBP Traders Shouldn't Miss BoE & Headline PMIs
Ever since the BoE Governor, Mark Carney, disappointed global markets by asking for some more time to announce additional monetary easing during mid-July, the GBP traders are betting hard on the "Super Thursday" when the policy maker is most likely to announce a rate-cut and/or mix of monetary measures to counter Brexit damages on the UK economy.
At the data-front, after the Monday's three year low Manufacturing PMI, the Tuesday's Construction PMI & Wednesday's Services PMI, are some additional details that could entertain GBP traders ahead of the important Thursday. The Construction PMI is expected test the seven years' low of 44.2 against 46.00 prior while the Services PMI is likely remaining stagnant at 47.4 mark. However, it should be noted that the Markit released surprise PMI announcement during mid-July in order show the impact of Brexit on these crucial economics. Hence, any up-tick from the forecast might help the GBP ahead of "Super Thursday".
Observing the BoE events, the UK central bank is also scheduled to publish its Quarterly Inflation Report (QIR), in addition to the monetary policy announcement and a press conference from the Governor on Thursday. As the BoE is almost certain to cut its official bank rate for the first time since 2009 to 0.25% from 0.5% present mark, GBP traders would closely examine other details of Inflation report and the Governor's press conference in order to examine clues for the central bank's next move.
While continued decline in leading PMIs can trigger the GBP south-run, a dovish tone of the BoE Governor, coupled with more than expected measures to tame the Brexit pessimism, might again drag the Pound towards referendum-day lows. Though, a surprise announcement of only the well-expected rate-cut, with a hawkish statement, can eventually initiate up-moves of the UK currency.
New-Zealand Inflation, Job Details & RBA Is Crucial For NZD & AUD
Even as the New-Zealand Dollar (NZD) maintained its advance after RBNZ refrained from signaling any immediate rate-cuts during its surprise economic assessment, the central banker flashed the threat of below 2% inflation for seven straight quarters during late-July. Hence, the quarterly reading of New-Zealand Inflation Expectations, scheduled for on Tuesday, followed by headline job details on the same-day, become crucial to forecast next step of the RBNZ. Given Inflation reading dip below 1.6% mark and the Unemployment rate ticked above 5.2%, together with the lesser than 1.2% Employment Change, the New-Zealand central bank might be forced to announce much delayed rate-cut, which in-turn can activate the NZD south-run.
For AUD traders, monetary policy meeting by the RBA, on Tuesday, is likely to disappoint the AUD bulls. The central banker is expected to announce a second rate-cut during 2016 with the post-meeting cash-rate to be at 1.5% from 1.75% present levels. Further, the Australian central bank might also sound dovish in his cash-rate statement and can amplify the AUD downturn. Hence, a well-expected rate-cut might start the Aussie decline which has been enjoying a safe-haven ride since long; though, a surprise no rate-cut and a statement showing chances of improvement in AU economy, which is less likely, can further propel the AUD's northward trajectory.
Last But Not The Least: Canadian Labor Market Numbers
In addition to aforementioned top-tier details/events, the Canadian Job numbers, Trade Balance and the monthly reading of Ivey PMI are some other data-points that could fuel into the crucial week on Friday. The Canadian Dollar (CAD) has been struggling with declining Crude prices, its main export item, but headline economics can help the Loonie, as the CAD is nicknamed, traders forecast its near-term trend.
Consensus suggests a shrink in Trade Deficit to -2.6B from -3.3B prior, a 51.9 number of Ivey PMI against 51.7 earlier reading and a +10.2K Employment Change versus -0.7K previous mark. However, the Unemployment Rate is likely to tick higher to 6.9% as compared to the June release of 6.8%.
Although majority of the scheduled economics favor an uptick by the CAD, increasing Unemployment and continued downside by the Crude prices might keep forcing the Canadian Dollar towards south.
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