Forex Weekly Outlook - September 4-8 2017
The US dollar was under pressure but managed to stage a comeback. The upcoming week features rate decisions in Australia, Canada, and the euro zone, as well as other events. Here are the highlights for the upcoming week.
Yellen’s lack of hawkishness in Jackson Hole continued weighing on the US dollar. North Korea fired a missile over Japan and this triggered a risk off reaction, helping the Japanese yen. However, positive US data, such as 3% GDP growth, gave a boost to the greenback allowed it to recover. The jobs report was somewhat disappointing with a gain of 156K jobs. EUR/USD shot up above 1.20 but dropped quite quickly as well. Despite higher inflation, the common currency dropped due to reports that the ECB doesn’t like its strength. The pound had a mixed week, with hopes for soft Brexit meeting the reality of tough negotiations.
Updates:Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australian lowered its interest rate to 1.50% in August 2016 and hasn’t changed it since then. This time will not be different. In the past few months, the RBA sent mixed messages regarding their next moves, but one thing is clear: they are not pleased by the strength of the A$. Will they try to talk down the currency now? UK Services PMI: Tuesday, 8:30. The third in the series of purchasing managers’ indices, is the most important one, for the largest sector. Back in July, the figure stood at 53.8 points, into growth territory, but below levels seen early in the year. The publication has a significant impact on the pound. A score of 53.6 is on the cards. Australian GDP: Wednesday, 1:30. Australia’s GDP will also be eyed as a proxy for Chinese growth and to the global economy. In Q1, the economy grew by 0.3%. While this exceeded early expectations, it is not impressing in absolute terms. Economists expect a growth rate of 0.9% q/q in Q2 2017. US ISM Non Manufacturing PMI: Wednesday, 14:00. This report for the services sector is usually published before the Non Farm Payrolls and serves as an indicator. This time, it is published six days afterward, giving it space of its own. In July, ISM reported a disappointing drop in the indicator: 53.9, a drop of 3.5 points from June and lowest since August 2016. A reversion to higher levels is expected: 55.5 points. Canadian rate decision: Wednesday, 14:00. The Bank of Canada raised rates in July and also issued a hawkish statement. The C$ jumped before and after the decision. Since then, the Canadian dollar cooled down and the BOC is not seen as very eager to hike soon. This time, no change is expected, but the accompanying statement will be closely watched for hints about a hike in October. All the options are on the table. ECB rate decision: Thursday, 11:45, press conference at 12:30. Will the ECB announce QE tapering? And what will the scale be? These are open questions that keep EUR/USD on the edge. We know that the central bank will make a decision in the fall, according to what ECB President Mario Draghi said in the previous decision. The bond buying scheme currently consists of 60 billion euros per month until the end of 2017 and the big question is for the future of the program in early 2018. Will they make another reduction of 20 billion but continue the program for longer? Or will they reduce the scale on a monthly basis and end it soon? The ECB could also delay the decision to the October meeting, but making a decision now makes more sense. The ECB releases new forecasts for inflation and growth right now and they usually make decisions around the decisions that include new forecasts. EUR/USD is holding its breath. Japanese GDP (final): Thursday, 23:50. Japan’s preliminary publication of Q2 GDP came out much better than expected: a quarterly growth rate of 1%. Will it be downgraded this time? Japanese GDP reads see significant revisions. A downgrade to 0.7% is projected. Canadian jobs report Friday, 12:30. With the early publication of the US jobs report, Canada’s own measure gets its own time in the limelight. Canada reported a gain of 10.9K jobs in July. The OK result was not as impressive as most reports so far in 2017. The unemployment rate stood at 6.3%. A rise of 15K is predicted. The unmeployment rate is expected to remain unchanged at 6.3%.