Even with the upbeat US Durable Goods Orders and GDP numbers, that fueled the US Dollar Index (I.USDX) towards registering first weekly positive closing in previous three, the greenback Index is still heading for monthly loss as US Fed policy makers are divided about the September rate hike after recent Chinese move rattled global financial markets. The Euro region currency, which declined during last week, strengthened against majority of its counterparts on a monthly basis as successful aid delivery to Greece faded speculations concerning Grexit. The GBP remained a bit sidelined with the GDP numbers matching initial forecast and BoE policy makers show less intention to start tightening monetary policy soon while the commodity currencies, namely AUD, NZD/USD and CAD, faced considerable declines as fears emanating from their largest consumer, China, also dampened their economic prospects. On the commodity front, Crude and Copper witnessed large losses due to the Chinese move while Gold prices gained a bit of ground, supported by safe haven demand that also favored JPY prices.
The current week offers many important releases/events that could provide noticeable forex moves. Amongst them, labor market details from US, monetary policy meetings by the European Central Bank (ECB) and the Reserve Bank of Australia (RBA) coupled with the monthly PMIs from UK and US, are likely to gain major attention. Moreover, GDP numbers from Australia and Canada, together with the Manufacturing PMIs from China, are additional details that can result in busy trading schedule for the Forex market players.
US NFP To Help Determine September Lift-off
With the much awaited September FOMC just around the corner, on September 16-17, all eyes have turned on the Federal Reserve to know when the central banker of the world's largest economy adheres to first interest rate hike since 2006. Even if the recent Chinese move have damped speculation of September lift-off, stronger US economics keep pushing some of the FOMC members towards expecting an interest rate increase during this month's monetary policy meeting. However, monthly release of labor market details, scheduled during the Friday, becomes important to see whether the US economy is well in-line with the central banker's expectations that could help them tighten the monetary policy.
The US Bureau of Labor Statistics is expected to print another 200K+ NFP, 220K against 215K prior, during its Friday release while the Average Hourly Earnings bears the consensus of maintaining 0.2% growth; however, the Unemployment Rate is likely testing the lowest level since April 2008 with 5.2% mark compared to previous release of 5.3%. Other than the NFP and Unemployment rate, ADP Non-Farm Employment Change, scheduled for Wednesday, is an important labor market number as it becomes an advance signal to forecast the Friday's releases. The private sector reading is likely to print 204K mark against it 185K prior, favoring a higher NFP and can help extend recent USD up-move. Hence, stronger labor market details, coupled with recently published upbeat growth number, could provide an additional push to the policy members favoring September rate hike, in-turn supporting USD rally. However, weaker inflation reading can still continue fueling uncertainty over the September interest rate lift-off decision.
Other than the labor market numbers, Monday's Chicago PMI, Tuesday's ISM Manufacturing PMI and Thursday's ISM Non-Manufacturing PMI, coupled with the monthly details of Factory Orders m/m, scheduled for Wednesday and the Thursday's Trade Balance, are some of the additional details that could also trigger considerable USD moves. While the Trade Balance, Chicago PMI and ISM Manufacturing PMI are expected to print readings near to their prior levels, the ISM Non-Manufacturing PMI and the Factory Orders are likely posting weaker numbers to 58.3 and 0.8% against their respective previous releases of 60.3 and 1.8%. Thus, scheduled details depicting US economic situation other than the labor market favor weaker USD should they actual match forecasts.
ECB and UK PMIs To Trigger Respective Moves Of EUR And GBP
Monday's EU Flash CPI, which matched its 0.2% consensus, increased the importance of monetary policy meeting by the ECB, scheduled on Thursday, wherein the ECB President will announce the quarterly economic forecasts at a press conference. With weaker economic numbers off-late, fears of disinflation into the region have again erupted, favoring additional monetary policy easing to support Euro-zone's fragile economic recovery. Even if the central bank isn't expected to alter their current monetary policy during this meeting, downward revision to economic forecasts and/or dovish tone of ECB President could favor additional monetary easing and can magnify the EUR losses.
Having observed the Summer Bank holiday on Monday, the UK markets will resume on Tuesday with monthly details of Manufacturing PMI. Moreover, Wednesday's Construction PMI and the Services PMI, scheduled for release on Thursday, are additional indicators that can help better analyze the GBP moves. While Manufacturing PMI is expected to remain at the prior level of 51.9, PMIs relating to the Construction and the Services are likely favoring the GBP up-move with 57.6 mark compared to 57.1 and 57.4 prior.
Details from China, Australia and Canada
Manufacturing numbers from China, scheduled for Tuesday, become crucial after the Yuan devaluation provided considerable damages to the commodity currencies, especially AUD for which China is the largest consumer. The official gauge of Manufacturing PMI is expected to plunge below 50.00 level to 49.8, signaling a contraction in Manufacturing activity, while the Final version of Caixin Manufacturing PMI is likely remaining below 50.00, by marking 47.2 against 47.1 prior. Should these numbers match consensus, pessimism surrounding China could continue hurting the industrial world and the commodity currencies.
On the Australian front, monetary policy meeting by the RBA, scheduled for Tuesday, together with the quarterly reading of Q2 2015 GDP, up for Wednesday release, are crucial events that could determine near-term AUD moves. The central bank is likely to hold its monetary policy unchanged while the GDP number is expected to mark 0.4% print against 0.9% previous release. Although, lesser chances favor an interest rate cut by the central banker, a surprise rate cut and/or weaker growth numbers, observing the Chinese effect, could trigger considerable downside of the Australian Dollar.
After a pullback in Crude prices, the main export of Canada, monthly reading of Canadian GDP and the Ivey PMI, scheduled for release on Tuesday and Friday respectively, are important details that could direct immediate CAD moves. The GDP number is expected to reverse its previous -0.2% decline by the +0.2% mark while the PMI number bears the consensus of printing 53.5 mark against 52.9 prior. Moreover, monthly details depicting Canadian labor market strength, scheduled for Friday, are showing mixed signals as the Labor Productivity is likely to reverse its previous -0.1% mark with +0.1% while the Employment Change is expected to print 2.0K compared to 6.6K prior and the Unemployment rate bears the consensus of remaining unchanged at 6.8%. Hence, with the recent improvement in Crude oil better economic numbers could stall the CAD decline and help the Loonie, as it is nicknamed, recover some of its losses.