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August 3, 2018

IronFX, Next week’s market movers - Central Bank Decisions to get the market’s focus

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In the coming week, a number of financial data releases could get the attention of the markets.

IronFX’s team handpicked the ones which it considers as the most influential and discusses their possible (current) forecasts and their respective effects on various currencies.

Monday, August 6th

On Monday, no major financial releases are expected.

Tuesday, August 7th

On Tuesday, late in the Asian session, RBA’s interest rate decision will be released.

The bank is widely expected to remain on hold at +1.50%, as currently AUD OIS imply currently a probability for such a scenario of 99.66%, making it more or less an open and shut case.

Hence the market’s attention is expected to turn to the accompanying statement.

As the inflation rate accelerated to +2.1% yoy for the second quarter of 2018, it broke the lower threshold of RBA’s inflation target range of +2.00% yoy and could provide a more optimistic view from the RBA.

The retail sales growth rate to +0.4% mom as well as the low unemployment rate could strengthen the pre-mentioned argument.

Should there be a more hawkish tone in the accompanying statement than previous releases, especially about inflation and household consumption we could see the AUD strengthening.

Other than that, the meeting could prove a nonevent for the AUD, like previous recent meetings or even weaken the Aussie.

Wednesday, August 8th

On Wednesday, during the Asian session we get China’s Trade Balance figure for July.

The figure is forecasted to be a narrowed surplus of +38.75B USD if compared to previous reading of +41.47B USD.

Should the actual figure meet the forecast we could see the AUD and NZD strengthening.

The main reasons behind a possible strengthening of the Aussie and the Kiwi, would be not on the narrowing of the trade balance surplus as such, but on the acceleration of the Chinese imports growth rate from 14.1% to 17.0% implying that possibilities for further exports to China from Australia and New Zealand rise.

On the other hand, the slow-down of the exports growth rate for July could have been affected by the US tariffs and could provide a clearer idea as to what is expected should there be further US tariffs for Chinese products imported in the US, magnifying the importance of the particular indicator.

Thursday, August 9th

On Thursday, early in the Asian session we get RBNZ’s interest rate decision.

The bank is widely expected to remain on hold at +1.75% as currently NZD OIS imply a probability for such a scenario of 99.15%.

As chances for the bank to remain on hold seem to be rather high we could see the market’s attention turning to the accompanying statement, scrutinizing it for any clues about the bank’s future intentions.

With the inflation rate for Q2 accelerating to +1.5% yoy, unemployment remaining at rather low levels (4.5%) and no new release regarding the GDP growth rate, we could see chances for the bank’s next rate move to be a rate cut being reduced and the uncertainty of the relative remark slowly being removed.

Should the bank have a more hawkish tone than in the previous decision we could see the Kiwi strengthening, while should it have a neutral to dovish tone, NZD could weaken or the meeting could pass as a non-event.

Friday, August 10th

On a busy Friday, early in the Asian session we get Japan’s preliminary GDP growth rate for Quarter 2.

The rate is forecasted to accelerate and grow at a rate of +0.3% qoq if compared to previous reading of -0.2% qoq.

Should the actual rate meet the forecast we could see the Yen strengthening as the rate is out of the negative area and the acceleration is substantial.

Please also note that the rate is also forecasted to get out of the negative area and accelerate substantially (+1.4% yoy expected vs -0.6% yoy prior) on a yearly basis, supporting the arguments for a strengthening of the Yen.

In the European session we get UK’s GDP growth rate for Q2.

The rate is forecasted to accelerate and reach +1.4% yoy if compared to previous reading of +1.2% yoy, while on a quarter on quarter basis the rate is forecasted to accelerate and reach +0.4% qoq, if compared to prior reading of +0.2% qoq.

Should the actual rate meet the forecast we could see the pound being supported.

Given that the GDP growth rate has been a focal point in UK’s financial releases lately especially considering the recent developments in the Brexit negotiations, the rate’s acceleration could provide a positive note for the UK economy despite the small acceleration.

In the American session we get Canada’s Employment data for July.

The employment change is forecasted to drop to +24.0k if compared to previous reading of +31.8k, while the unemployment rate is forecasted to also drop to 5.8% if compared to previous reading of 6.0%.

Should the actual readings meet the forecasts we could see the Loonie getting some support, despite the drop of the employment change figure as it remains in the positive area and the market could perceive +24.0k as a tolerable level.

The boost may be provided by the drop of the unemployment rate, which once again drops to the lowest level for the past 3+ years.

Last, but not least we get the US inflation rates for July.

The headline rate is forecasted to remain unchanged at +2.9% yoy as is the core inflation rate also forecasted to remain unchanged at +2.3% yoy though.

Should the actual rates meet the forecast we could see the USD getting some support as both rates remain at rather high levels (actually the highest levels for more than a year), strengthening the arguments for the continuation of the Fed’s current 2 rate hike path in 2018.

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