Trading on key Forex news: we are waiting for the decision of the Bank of Canada on the interest rate, the publication of inflation indicators for Germany and the US, as well as the publication of the minutes from the June ECB meeting on monetary policy.
As reported by the US Department of Labor on Friday, the number of jobs outside agriculture in the country in June increased by 213,000, and unemployment rose to 4.0% from 3.8% in May. The increase in wages in June was + 0.2%. The forecast was +195000 new jobs, 3.8% unemployment rate, salary growth by 0.3%, respectively.
The number of jobs outside agriculture in the US has increased for 93 consecutive months, which is the longest period in the history of such statistics.
Stable recruitment and low unemployment indicate that the US labor market remains strong. Economists also forecast that the country's GDP growth in the second quarter exceeded 4% per annum for the first time since 2014. Official data on US GDP growth in the second quarter will be presented later in July.
In general, the published indicators can be referred to as strong. Accelerating inflation and low unemployment are likely to cause the Fed to continue to gradually increase interest rates over the next year.
Nevertheless, the US dollar fell to a three-week low on Friday, as investors drew attention to rising unemployment and weaker-than-expected wages growth.
It is also likely that many investors wanted to consolidate profits in long positions on the dollar. Dollar index DXY reflecting the value of the dollar against the basket of the six major currencies, fell by 35 points on Friday to the level of 93.76.
In total, over the past week, which was full with important events and publications of important macro statistics, the dollar index DXY lost 0.55% or 52 points.
The focus of the traders' attention this week will be meetings of the Bank of Canada and its decision on the interest rate, the publication of inflation indicators for Germany and the US, and the publication of the minutes of the June ECB meeting on monetary policy.
As always, a number of most important macroeconomic data and some important news are expected to be published this new trading week.
Monday, July 9
There are no important marco economic news planned Tuesday, July 1011:30 (GMT+3)
GBP UK GDP
GDP is considered an indicator of the overall state of the economy. The growth of GDP is considered positive for GBP, a poor result weakens the pound.
Recently, the UK has presented macro data indicating some acceleration in the growth rate of the economy and a nevertheless high level of inflation.
General data on the production sector, construction and services in June improved. At the same time, as the head of the Bank of England Mark Carney recently said, because of tensions in international trade, external risks have increased, which may have negative consequences for interest rates.
Uncertainty in connection with Brexit also puts pressure on the pound and on the Bank of England, forcing it to be cautious about changing the current monetary policy.
Therefore, if the published data points to GDP growth, it will cause a short-term increase in the pound, but this will not be enough for the Bank of England to decide to raise the interest rate in the short term.
Wednesday, July 1117:00 CAD Bank of Canada's interest rate decision. Accompanying statement of the Bank of Canada
The Bank of Canada decides on the interest rate. It is widely expected that the Bank of Canada will leave the interest rate at the current level of 1.25%.
The National Bureau of Statistics of Canada reported last Friday that in June, the economy added 32,000 jobs, and unemployment rose to 6.0%. Meanwhile, the foreign trade deficit in May turned out to be greater than the forecast, amounting to 2.77 billion Canadian dollars, as exports declined.
Uncertainty in the US trade policy under the North American Free Trade Agreement (NAFTA) adversely affects the monetary policy of the Bank of Canada and the Canadian economy. Nevertheless, economists are giving their forecast, according to which the Bank of Canada may decide to raise the rate by 0.25% to 1.50%.
In its accompanying statement and a report on changes in monetary policy, representatives of the Bank of Canada will explain the bank's position and assess the current economic situation in the country. If the tone of the Bank of Canada's accompanying statement is rough, including with regard to rising inflation, the Canadian dollar will strengthen on the foreign exchange market. If the Bank of Canada will be giving signals that it will extend the period of maintaining a soft monetary policy, the Canadian currency will decline.
18:00 CAD Report of the Monetary Policy Committee of the Bank of Canada
The report contains information on changes in the monetary policy of the Bank of Canada. This, in turn, can cause high volatility in the CAD. If the tone of the report is rough in respect of the outlook for monetary policy, the Canadian dollar will strengthen. The soft tone of the report can weaken the CAD.
18:15 CAD Press conference of the Bank of Canada
During the press conference, head of the Bank of Canada Stephen Poloz will explain the bank's position and assess the current economic situation in the country. If the tone of Stephen Poloz's speech is rough with respect to the monetary policy of the Bank of Canada, the Canadian dollar will strengthen on the foreign exchange market. If Stephen Poloz expresses his support for maintaining soft monetary policy, the Canadian currency will decline.
Investors also want to hear Poloz's opinion about the prospects of the NAFTA. Earlier, Donald Trump threatened to withdraw from the NAFTA. Since June 1, new US import duties on steel and aluminum (25% and 10%, respectively) have come into force, and Canadian Prime Minister Justin Trudeau has announced a retaliatory action against the United States. The total value of imports from the US, which will be subject to new duties, is 16.6 billion Canadian dollars (12.8 billion US dollars). This is as much as the value of Canada's exports to the US in 2017. This is the strongest response measures that the country has decided on since the World War II.
It is possible that Stephen Poloz will also assess the current situation in the trade relations between the two countries.
In any case, during the press conference and speech by Stephen Poloz, the highest volatility in the Canadian dollar is expected.
18:35 GBP Speech by head of the Bank of England Mark Carney
Market participants expect the head of the Bank of England Mark Carney to clarify the situation regarding the future policy of the central bank of Great Britain. Volatility in the pound trade in this period may rise sharply, because Mark Carney can turn the markets around with his unexpected statements.
As head of the Bank of England, Mark Carney, recently said, because of the tension in international trade, external risks have increased, which can cause negative consequences for interest rates. Many investors expect that during the August meeting, the Bank of England may decide to raise the interest rate to "knock down" inflation, which is at high levels after the June 2016 referendum on Britain's withdrawal from the EU. Until now, the continuing uncertainty about Brexit is forcing the Bank of England to be cautious about changing the current monetary policy.
If, however, Mark Carney does not touch upon the questions of the monetary policy of the Bank of England, the reaction to his speech will be weak.
Thursday, July 1209:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany (final estimate)
This index (HICP) is published by the EU Statistics Office and is calculated on the basis of the statistical methodology agreed upon by all EU countries. The index is an indicator for estimating inflation and is used by the ECB Governing Council to assess the level of price stability. A positive result strengthens the EUR, a negative result weakens it.
Forecast: in June, the HICP index (in annual terms) increased by 2.1% (against + 2.2% in the previous month). If the data prove to be weaker than the forecast, the euro will react with a decrease. Data better than the forecast and the previous release (+ 2.1%) will strengthen the euro.
14:30 EUR Information about the ECB meeting on monetary policy
This document contains an overview of the current policy of the ECB with the planned changes in the financial and monetary spheres. The publication of this document may cause a surge in volatility in the euro and the European stock market.
15:30 USD Consumer price index. Core consumer price index
A block of important inflation indicators for the USA for June. The Consumer Price Index (CPI) is a key indicator for assessing inflation and changes in consumer preferences. A positive result strengthens the USD, a negative result weakens it. Forecast: + 2.9% (against + 2.8% in May) in annual terms.
The Core Consumer Price Index (Core CPI) determines the change in the prices of the selected basket of goods and services for a given period. Food and energy are excluded from this indicator to obtain a more accurate estimate. A strong result strengthens the US dollar, while a low one weakens it. Forecast: + 2.3% (against + 2.2% in May) in annual terms.
If the data is confirmed, the dollar is likely to react with growth.