Forex Weekly Outlook – October 3-7

After consolidation and correction, the tables turned in favor of the dollar once again and as a new quarter begins, the calendar is very busy. Rate decisions in the euro-zone, Britain, Australia and Japan and a grand finale with US Non-Farm Payrolls are at the top of our market-movers list this week. Here is an outlook on the major events lined up.

Hopes towards a huge bailout fund in Europe began meeting reality. Also the more immediate matters, such as the next tranche of aid for Greece, aren’t resolved. The troika returned to Athens, but the deal isn’t done. Not yet. Last week US jobless claims fell to 391K indicating recession is not around the corner. Is this promising figure an indicator that the unemployment rate would bring the US economy and job market back on track? We have many important figures leading up to the NFP.

Let’s Start

1.  US ISM Manufacturing PMI: Monday, 14:00. Manufacturing activity in the U.S. dropped less-than-predicted in August reaching 50.6 following 50.9 in the previous month. The reasons for this decline are global financial situation and domestic concerns. A small drop to 50.5 is predicted. Any slide under the critical 50 point mark will be very worrying, as it represents a slip to contraction. The employment component in this report will provide some guidance towards Non-Farm Payrolls.
2. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia (RBA) maintained the cash rate steady at 4.75 in line with predictions. The RBA is concerned over the medium term outlook for inflation though slow economic growth will tame inflation. The rate is expected to remain 4.75%. The Aussie, which was beaten once again, will likely move by the accompanying statement. A rate cut to 4.50% has small chances, but cannot be ruled out.
3. Ben Bernanke speaks: Tuesday, 14:00. Ben Bernanke, Chairman of the Federal Reserve will speak at the JEC Hearing on “The Economic Outlook” in Washington DC. His words will rock the market even if he doesn’t say anything about Operation Twist.
4. US ADP Non-Farm Employment Change: Wednesday, 12:15. According to ADP, the US private-sector increased employment by 91,000 in August following 109,000 in the previous month indicating positive job growth. Another increase of 76,000 is expected now. Note that there was a big gap between ADP’s report and the private sector component in the NFP last month, so this should be taken with a grain of salt.
5. US ISM Non-Manufacturing PMI: Wednesday, 14:00. Economic activity in the non-manufacturing sector increased in July to 53.3 from 52.7 in the previous month, indicating   continuous growth in the non-manufacturing sector. A small decrease to 53.1 is predicted. The vast majority of the US economy is in this sector, so any result, and especially the employment component will provide an excellent hint towards the NFP.
6. UK rate decision: Thursday, 11:00. The Bank of England maintained rates at 0.5% as was for the past two years but talked about enlarging the stimulus injected to the market in order to help recovery and will do so in case of worsening economic conditions. No change is expected now. Another injection of 50 billion pounds is expected in November. If the BOE pushes forward this decision, the pound will drop. Another non-decision might provide some strength to sterling.
7. Euro-Zone rate decision: Thursday, 11:45. European Central Bank’s (ECB) latest announcement left Minimum Bid Rate at 1.50%. Trichet is expected to cut the rate by 0.25% to 1.25% this time, reversing previous hikes. The chances of a 0.50% cut were cut after euro area inflation jumped to a pace of 3%. In any case, the press conference that will follow the decision will probably be a great show from the outgoing president and a very volatile time for he euro.
8. US Unemployment Claims: Thursday, 12:30. The number of Americans filing first-time claims for  unemployment slipped more than forecast last week. The number of applications dropped 22,000 to 391,000 last week from 428,000 in the preceding claims indicating an improvement in the job market. Economists expected claims to decrease to 420,000. Companies stopped layoffs which is favorable reflected in this reading and in case they will start recruiting, unemployment would go down considerably. An increase to 411,000 is forecasted now.
9. Japan rate decision: Friday. The  Bank of Japan  left its   overnight call rate steady at a range of 0 to 0.1% by a unanimous vote to achieve lasting price stability and overcome deflation pressures. No change is foreseen. There is a small chance of another intervention to weaken the yen after the meeting.
10. Canadian employment data: Friday, 11:00. The Canadian economy decreased the number of jobs by 5,500 in August following a gain of 7,100 in July. However the numbers do not reflect the positive trend of replacing part-time jobs by full-time jobs. Meanwhile, the unemployment rate increased to 7.3% the biggest drop in employment since September 2010. Canadian job market is expected to increase by 19,600 positions and Unemployment rate is expected to remain 7.3%.
11. US Non-Farm Employment Change: Friday, 12:30. – This time, we will have many indicators leading up to this release, so expectations can change during the week. The US Job market did not produce new positions in August this weak reading contrasts with the 53,000 gain predicted by analysts indicating a slowdown in economic activity. A gain of 51,000 is predicted.
12. US Unemployment rate: Friday, 12:30. The US unemployment rate remained at 9.1% in August and added no jobs, raising concerns that the US is heading for another recession. US Unemployment rate is expected to remain 9.1%. A drop to 8.8% or less will overshadow the NFP, and so will a rise to 9.4% or above.

*All times are GMT.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

Further reading:

• For EUR/USD, check out the  Euro to Dollar forecast.
• For the Japanese yen, read the  USD/JPY forecast.
• For GBP/USD  (cable), look into the  British Pound forecast.
• For the Australian dollar (Aussie), check out the  AUD to USD forecast.
• For the New Zealand dollar (kiwi), read the  NZD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar
• For the Swiss Franc, see the  USD/CHF forecast.