FORECAST :USD/GBP/CAD/JPY/AUD Weekly Forecast (NFP ,PMI,Trade Balance,China Report)
Weekly Forecast Major Pair (Fundamental mews )
One look at the forex calendar tells us that purchasing managers’ indices (PMI) from the manufacturing and non-manufacturing industries are scheduled for release over the next couple of days.
The Institute for Supply Management (ISM) is first with its manufacturing PMI due at 3:00 pm GMT today. Market players see it slipping further to 51.2 after May’s release reflected contracting imports, lower supplier deliveries, and higher raw materials inventories.
We won’t see ISM’s non-manufacturing PMI until Wednesday at 3:00 pm GMT. Like in the manufacturing release, analysts see a dip from 56.9 to 56.1 in June. The employment component of the report is a good leading indicator of the big NFP release, so y’all can bet that analysts will be watching this one closely.
Market also has PMI reports scheduled though they’re the final versions of earlier releases so they might not rock the boat as much as ISM’s reports do.
The manufacturing PMI is expected to hold on to its 50.1 reading while the final services PMI is estimated to maintain its 50.7 figure. Watch out for hits or misses that can affect the dollar’s intraday price action!
2.U.S. NFP report (Jul 5, 1:30 pm GMT)
On Friday at 1:30 pm GMT Uncle Sam is scheduled to print its non-farm payrolls (NFP) report.
Recall that the economy gained a net of 75,000 in June, much weaker than the downwardly revised 224,000 in May and the 185,000 figure that analysts had expected. Unemployment rate steadied at 3.6, however.
This week market players see the headline NFP improving to 158,000, average hourly earnings speeding up from 0.2% to 0.3%, and the unemployment rate maintaining its 3.6% reading.
Planning on trading the event? You could get clues from leading indicators scheduled before the actual NFP report. I’m talkin’ about the PMIs, the ADP employment change, and the weekly unemployment claims.
Remember that traders are already worried that last month’s numbers point to the labor market weakening enough that the Fed will have to step in with more stimulus .
If this week’s numbers disappoint, then we could see more rate cut bets and the dollar lose pips against its higher-yielding counterparts. But if we see upside surprises in employment and wage growth releases, then the Greenback could take back a pip or two against its major counterparts.
3-U.K. PMI readings (starting July 1, 8:30 am GMT)
The second half of 2019 is off to a bit of a slow start for the pound as only medium-tier reports like PMI readings are on the docket this week. Still, it would help to keep tabs on the results since these are seen as leading indicators of economic performance.
First up is the manufacturing PMI, which is slated to have ticked higher from 49.4 to 49.5 in June to reflect a slightly slower pace of contraction. A stronger than expected result or one that’s enough to indicate industry expansion above 50.0 could give the pound a decent boost.
Next up is the construction PMI due on Tuesday’s London session. Now pound pairs don’t usually have a big reaction to this release, but just note that number crunchers are expecting to see an improvement from 48.6 to 49.4.
Lastly, the services PMI is up for release on Wednesday’s London session and might show another 51.0 read. Sterling tends to react to this report since the sector accounts for a huge chunk of overall economic growth, so an upside surprise could assure market watchers that Brits are keeping calm and carrying on despite Brexit risks.
4-U.K. PM Race
The race for the Prime Minister spot is still on between former London mayor Boris Johnson and underdog Jeremy Hunt. The final vote isn’t due until July 22, which means that the focus over the next couple of week would be on their Brexit plans and what their “no deal” options would be.
5-Trade balance (Jul 3, 1:30 pm GMT)
Canada registered a 0.97B CAD trade deficit in April, which was much narrower than the downwardly revised 2.34B CAD deficit in March and the 2.8B CAD figure that analysts had expected. In fact, it was the narrowest trade deficit in since October 2018!
Turned out, exports had gone up by 1.3% as higher gold purchases boosted metal and non-metallic mineral products. Sales of wheat and crude oil had also contributed to the positive numbers.
Meanwhile, imports fell by 1.4% as aircraft purchases and consumer goods dropped.
At the time, Loonie bulls celebrated the positive release and boosted the comdoll to its new intraweek highs.
This week analysts expect to see the trade deficit widen a bit to 1.60B CAD in May. If you recall, crude oil prices fell sharply during the month.
If you’re trading the event, you should know that closely watched reports such as the U.S. ADP and ISM’s non-manufacturing PMI releases are due in the same trading session. That means unless we see significant hits or miss, it’s likely that reaction to the trade numbers are muted.
6-Employment and IVEY PMI numbers (Jul 5, U.S. session)
Canada’s got its own NFP gig! On Friday the economy will print its labor market numbers for the month of June.
Not surprisingly, the Loonie shot higher against its counterparts at the release.
Market geeks see a net employment change of 5,000 in June while the unemployment rate could climb from 5.4% to 5.5%.
Planning on trading the event? First, you should know that Canada’s employment report will be printed AT THE SAME TIME as the U.S. NFP data. Like in the trade balance release, this means reaction can be muted.
You’ll probably have a better chance at pricing in Loonie-specific moves with the IVEY PMI scheduled after the NFP brouhaha.
IVEY PMI is one of the more closely watched leading indicators for Canada’s economy, and this week analysts see it rising from 55.9 to a 56.2 reading in June.
7-Quarterly Tankan reports
Reports printed earlier today showed the sentiment of Japan’s biggest manufacturers falling to a three-year low in Q2 2019.
A closer look tells us that chemicals, iron & steel, food & beverages, and machinery took the biggest hits, while sentiment improved in textiles, lumber & wood products, and petroleum & coal industries.
Meanwhile, non-manufacturing surveys reflected sentiment improving from 21 to an index reading of 23 in Q2 2019.
Reaction to the yen has so far been muted but watch your charts closely in case the bulls and bears come in during the Asian session!
8-Market risk sentiment
If you’ve read last week’s price reviews on the major currencies, then you’ll know that the high-yielding ones took pips from their lower-yielding counterparts as investors celebrated the prospect of major central banks (but mostly the Fed) making stimulus rain on their economies.
Only the RBA will publish its monetary policy decision this week but keep close tabs on other central bankers that might hit center stage and share their monetary policy biases!
Aside from central bank action, you might also want to pay attention to updates that might affect global trade conditions.
How long do you think the optimism will last? Will their reps make headway towards a trade deal this week?
9-RBA’s statement (Jul 2, 5:30 am GMT)
As expected, the Reserve Bank of Australia (RBA) cut its interest rates by 25 basis points to 1.25% last month. That’s the first cut since August 2016, yo!
The central bank shared that it was done to “support employment growth” and for inflation to be “consistent with the medium-term target.”
The move was already widely anticipated after a series of weak domestic data, so the decision didn’t cause a lot of pain for the Aussie. Heck, even the surprisingly dovish presser by RBA head Lowe failed to get bearish momentum!
This week analysts expect ANOTHER 25 basis-point rate cut from the RBA. And why not?
For one thing, Lowe had already shared that “It is not unrealistic to expect a further [interest rate] reduction.” He’s also not a fan of a measly rate cut when “everyone is easing,” Last but not the least, June’s meeting minutes revealed that it’s “more likely than not that a further easing in monetary policy would be appropriate.”
Before you short the Aussie like there’s no tomorrow, though, you should also note that only 70% of market geeks are expecting a rate cut this month. If the RBA is in a waiting mood, then it’s also possible for it to wait until its August estimates to deliver its next rate cut.
10-Trade balance (Jul 3, 2:30 am GMT)
Australia’s trade surplus narrowed down from 4.89B AUD to 4.87B AUD in April, marking the smallest surplus since January.
Turned out, exports had only grown by 2.0% while imports edged 3.0% higher for the month. Luckily for the bulls, traders were more interested in pricing in optimism over the trend of central banks getting ready to make stimulus rain on their economies.
If you’re trading the event, you should know that analysts see the surplus rising to 5.25B AUD in May. Watch the report for any remarkable trends that might hint at Australia’s future trading numbers!
11-China’s trade prospects
The NFP week is busier this time around with China’s official AND Caixin’s manufacturing and non-manufacturing indices for the month of June.
If you recall, China’s indices are flirting with the 50.0 mark that draws the line between expansion and contraction. Keep your eyes open for any significant drops and pops, as well as trends and patterns that might hint at China’s future manufacturing and non-manufacturing activities.
As if there’s not enough action in there, you should also watch how markets react to the U.S. and China resuming their trade negotiations. See, both camps have agreed not to impose further tariffs after a meeting in Japan last weekend.
How long will the optimism last? More importantly, how fast can representatives work on a trade deal that would finally lay a chunk of global trade concerns to rest?