End Of Week Technicals - Gold, EUR/USD, GBP/USD

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Press review

Sergey Golubev, 2015.09.05 09:34

Forex Weekly Outlook September 7-11 (based on forexcrunch article)

September began with more volatility and more uncertainty. Rate decisions in Canada; New Zealand and the UK, Employment data in Australia and US consumer sentiment all stand out. These are the main events on our calendar for this week. Join us as we explore these financial highlights.

The U.S. economy produced 173,000 jobs in August,falling short of estimates but with positive revisions and upbeat wage growth. The release came at a crucial timing of the rate-hike debate and the mixed report raised uncertainty, but we think the Fed could still bring on a “dovish hike”. In the euro-zone, things are far from quiet, with Draghi showing his will to act, weighing heavily on the euro. Commodity currencies couldn’t enjoy the Chinese holiday and were hit hard. Things are going to get messy again.

1. Canadian rate decision: Wednesday, 14:00. Canada’s central bank decided to lower its benchmark interest rate to 0.5% in July. This was the second cut this year, aimed to boost the economy. The BOC reduced its growth estimate in 2015 from its April projection after showing a mild contraction the first half of the year. However, the Central Bank forecasts a rebound in the second half of 2015, expecting 1.9% growth this year. Analysts expect the BOC will maintain rates this time.
2. US JOLTS Job Openings: Wednesday, 14:00. Job opening are eyed by the Fed as they provide a wider indication about the job market, even if this figure is delayed. In June, the figure stood on 5.25 million, and a rise to 5.33 million is on the cards for July.
3. New Zealand rate decision: Wednesday, 21:00. New Zealand’s central bank cut its benchmark interest rate by 25 basis points to 3.0% in July, in hope of raising inflation and boosting economic activity. The rate cut was in line with market forecast. The Central Bank growth outlook deteriorated since the last policy meeting in June. However, the local currency has decreased noticeably since then, aiding manufacturers with weaker commodity export prices. Analysts expect further cuts in September and in October as the slowdown in China starts to affect New Zealand’s economy. Economists forecast another rate cut to 2.75% this month.
4. Australian employment data: Thursday, 1:30. The unemployment rate in Australia edged up 0.2% in July reaching 6.3%, despite a job creation of 38,500 positions in July. Analysts expected a smaller addition of 10,200 jobs and unemployment rate of 6.1%. The reason behind the sharp rise in unemployment was an increase in the participation rate, reaching 65.1%. The rise in the number of job seekers may contribute to jobs growth in the coming months, which is a good thing for the Australian economy. Analysts expect a job gain of 5,200 positions and a decline in the unemployment rate to 6.2%.
5. UK rate decision: Thursday, 11:00. The Bank of England maintained interest rates at 0.5% in August despite one voting member calling to raise rates. Lack of inflationary pressures delayed the Central Bank’s decision to raise rates. However, Bank governor Mark Carney said a rise is “drawing closer”, but cannot “be predicted in advance”. The collapsing stock market in China and the talks over Greece’s debts painted a grim outlook of global growth, contributing to the Bank’s decision to postpone the rate hike. Nevertheless, the Bank expects inflation to return to target next year, rising 0.25% in the first four months and may double from 0.5% to 1% by the end of 2016. Analysts see not change in Carney’s monetary policy this time.
6. US Unemployment Claims: Thursday, 12:30. The number of Americans filing new applications for unemployment benefits rose last week by 12,000 to 282,000, exceeding forecasts of 273,000. However, the number of applications remain relatively low in time of a global slowdown. The four-week average increased 3,250 to 275,500. That average has fallen 9.2% over the past 12 months. The combination of steady job growth and low levels of applications suggests that the US economy will continue to expand in the coming months. Economists forecast the number of new claim will reach 279,000 this week.
7. US PPI: Friday, 12:30. U.S. producer prices in the US increased for a third straight month in July, rising 0.2% after a 0.4% gain in July. However, inflation pressures remained subdued against the backdrop of lower oil prices and a strong dollar. In the 12 months through July, the PPI declined 0.8% following 0.7% drop in June. It was the sixth straight 12-month decrease in the index. Producer prices are expected to decline by 0.1% in August.
8.  US UoM Consumer Sentiment: Friday, 14:00. U.S. consumer confidence weakened for a second month in August, as households were more pessimistic the rate hike aftermath. The University of Michigan’s preliminary index of sentiment contracted to 92.9 from 93.1 in July. Economists expected a reading of 93.5. The global financial turmoil caused by China has yet to affect future sentiment reports. Americans forecast an inflation rate of 2.8% in the next 12 months, the same as in July, the report showed. Over the next five to 10 years, they anticipated a 2.7%, down from 2.8%. U.S. consumer sentiment is expected to dip further to 91.6.