FX WEEK AHEAD OVERVIEW:
The US-China commerce conflict continues to rage, and its results will probably be obvious within the week forward as a few of each international locations’ largest buying and selling companions’ central banks will probably be leaning into rate of interest cuts.Development information from two different giant economies, Japan and the UK, are each anticipated to indicate indicators of a extra obvious slowdown.Retail dealer positioning is bearish on the commodity currencies, however isn’t that rather more optimistic in regards to the US Greenback after its early-August troubles.
Be a part of me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Forward webinar, the place we focus on prime occasion threat over the approaching days and methods for buying and selling FX markets across the occasions listed beneath.
08/06 TUESDAY | 04:30 GMT | AUD RESERVE BANK OF AUSTRALIA RATE DECISION
For the reason that final Reserve Financial institution of Australia fee resolution on July 2, the Australian economic system has not made any significant progress, nor actually has it achieved a lot detrimental: financial information traits have been flat. The Citi Financial Shock Index for Australia, a gauge of financial information momentum, gained from 1.eight on July 2 to 2.2 by Friday, August 2.
Reserve Financial institution of Australia Curiosity Charge Expectations (August 2, 2019) (Desk 1)
However, it stays unlikely that the August RBA assembly produces any change in coverage, with in a single day index swaps pricing in solely a 9% probability of a 25-bps fee lower. However to be clear, these odds have been zero% midweek; expectations are rapidly rising that the RBA may act as early as October, the place in a single day index swaps at the moment are pricing in a 61% probability of a fee lower.
Learn the total report: August RBA Assembly & AUD/USD Charge Forecast
08/07 WEDNESDAY | 02:00 GMT | NZD RESERVE BANK OF NEW ZEALAND RATE DECISION
The 2 huge New Zealand information releases within the interim interval for the reason that June RBNZ assembly each steered that the RBNZ economic system was on combined footing. Q2’19 New Zealand inflation information confirmed that worth pressures have been precisely as economists forecasted, at zero.6% (q/q) and 1.7% (y/y) – a rise from prior ranges, however nonetheless beneath the efficient 2% medium-term goal. Elsewhere, the newest labor market report confirmed that the New Zealand economic system noticed its unemployment fee creep increased to four.three% in Q2’19.
Reserve Financial institution of New Zealand Curiosity Charge Expectations (August 2, 2019) (Desk 2)
With the US-China commerce conflict raging, and proof beginning to emerge that international progress is being dragged down within the course of, the RBNZ appears prone to take extra steps to shore up the economic system. In a single day index swaps are pricing in a 99% probability of a 25-bps fee lower on the August RBNZ assembly and there’s a 71% probability of a last 25-bps fee lower this yr by November.
Learn the total report: August RBNZ Assembly & NZD/USD Charge Forecast
08/08 THURSDAY | 23:50 GMT | JPY Gross Home Product (Annualized) (2Q P)
With international commerce considerations heating up because of the US-China commerce conflict, international locations depending on manufacturing processes have seen a harder commerce setting. Japan has been unable to keep away from the collateral injury from the fallout of the commerce conflict between the world’s two largest economies. In keeping with a Bloomberg Information survey, Q2’19 Japan GDP is due in at an annualized tempo of zero.6%, down sharply from the two.2% clip recorded in Q1’19. Even when trying on the GDP report from the quarterly periodicity perspective, there’s little to love: zero.1% anticipated from zero.6%.
Learn the total report: Q2’19 Japan GDP & USD/JPY Charge Forecast
08/09 FRIDAY | 08:30 GMT | GBP Gross Home Product (2Q P)
Considerations over a tough Brexit have flared in latest weeks, thanks largely to the ascendance of Boris Johnson as the subsequent UK prime minister and his want to depart the European Union on October 31, deal or no deal. However even earlier than UK PM Johnson took management of 10 Downing Road, it was clear (because of the polls) no deal, exhausting Brexit chief was prone to head up the UK authorities.
General, the Citi Financial Shock Index for the UK, a gauge of financial information momentum, plummeted from 16.four to -43.7 over the course of the primary quarter. Accordingly, the Bloomberg Information consensus forecast for the Q2’19 UK GDP report requires no progress on a quarterly foundation and a slowdown to 1.four% from 1.eight% on an annualized foundation.
Learn the total report: Q2’19 UK GDP & GBP/USD Charge Forecast
08/09 FRIDAY | 12:30 GMT | CAD Gross Home Product (JUL)
The Canadian labor market is in search of a rebound in July after a gentle June. Bloomberg Information consensus forecasts name for the July Canada jobs report to indicate that the economic system added 15Ok jobs after shedding -2.2K in Might. However, 2019 has been a superb yr for the Canadian jobs market, averaging 41.3K jobs added monthly because the unemployment fee has come down to five.5%, the place it on account of keep on maintain.
Financial institution of Canada Curiosity Charge Expectations (August 2, 2019) (Desk three)
The very fact of the matter is that the resilient Canadian labor market is giving the BOC to maintain charges on maintain for the foreseeable future. The September BOC assembly solely has a 10% probability of a 25-bps fee lower, in accordance with in a single day index swaps. There’s a coin flip’s probability of a fee lower by the top of the yr, and a 60% probability of a 25-bps fee lower by January 2020.
Learn the total report: July Canada Jobs Report & USD/CAD Charge Forecast
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— Written by Christopher Vecchio, CFA, Senior Foreign money Strategist
To contact Christopher, e-mail him at email@example.com
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