Forex Weekly Outlook November 5-9

The US dollar eventually made a strong move higher with help from Non-Farm Payrolls. US Presidential Elections will be in the spotlight in the upcoming week. In addition, rate decisions in the Eurozone, Australia and the UK among more important US events all promise an exciting week. Here is an outlook on the major events to shape forex trading.

Last week The US published an excellent jobs report, revealing a 171,000 job increase in October with a rise to 7.9% in unemployment rate due to higher participation rate. In Europe, hopes for a deal on Greece came and went very fast. There are significant disagreements between troika and Greece, and within the parties. Some troika demands might be unconstitutional.    Will we see bigger currency movements this week?

1. US ISM Non-Manufacturing PMI: Monday, 15:00. The Institute for Supply Management  Non-Manufacturing PMI registered 55.1 reading in September, higher than the 53.7 score registered in August, suggesting a continued growth in the non-manufacturing sector. The majority of Respondents believe there is a positive perspective on current business conditions. A small drop to 54.6 is forecast, contrary to the rise in the manufacturing PMI. See how to trade the event with EUR/USD.
2. Australian rate decision: Tuesday, 3:30.Australia’s central bank reduced interest rates by a quarter point to 3.25% , amid a slowdown in  China, declining export prices and a strong Aussie. This move was unexpected. The RBA also lowered their growth outlook forecast for next year. Another 0.25% cut is expected in November. The Aussie is well positioned in a wide range.
3. US Presidential Elections: Tuesday-Wednesday. Barack Obama seeks a second term and is competing against Mitt Romney. The most urgent issue is the fiscal cliff – automatic tax hikes and spending cuts that will happen in 2013 unless both political parties reach a deal. The quality of the compromise and the time it will take to reach it depend on the result of the elections and will make a difference for the US economy and the whole world.  . Recent opinion polls show a very close race. There is a small chance that Obama will win the elections through the electoral college without winning the popular vote. This could complicate matters regarding the cliff.  See how to trade the US Presidential Elections with EUR/USD. Obama wins.
   Update: Analyzing the wide market reaction to the NFP,  an Obama victory could already be priced in, at least partially.
4. NZ employment data: Wednesday, 21:45. New Zealand’s employment market contracted unexpectedly by 0.1% in the second quarter, following a 0.4% increase in the preceding quarter. Analysts expected a 0.3% rise. Meanwhile NZ unemployment rate increased to 6.8% from 6.7% in the first quarter, suggesting the Reserve Bank of New Zealand will keep rates on hold for the foreseeable future. Job addition of 0.3% and a drop to 6.7% in unemployment rate is predicted now.
5. Australian employment data: Thursday, 0:30. The number of people employed increased by14,500 in September, following while the number of people unemployed rose by38,800 in the same month. The majority of job additions were full time positions which is a good sign for the Australian labor market. Meantime unemployment rate increased by 0.3% to 5.4% in September, higher than the 5.2% estimated. A small job increase of 600 is predicted with another increase to 0.1% in unemployment rate.
6. UK rate decision: Thursday, 12:00. The Bank of England kept its official Bank Rate unchanged at 0.50%, in line with predictions, also maintaining its asset purchase program at 375 billion pounds. There is a growing notion that the impressive jump in GDP during Q3 was only a one time “Olympic Leap”. While there are some other good signs, Q4 could already see a much slower economy. The latest expansion of the Asset Purchase Facility program (or QE) has already run its course and ended recently. An expansion of an additional 50 billion pounds cannot be ruled out in November, but the MPC could wait one more month before acting. A move in December has somewhat higher chances. A move in November will likely hurt the pound temporarily.
7. Eurozone rate decision: Thursday, 12:45. The European Central Bank maintained its Minimum Bid Rate at 0.75% in line with predictions.  Mario Draghi hinted about the danger of deflation in the euro-zone. Together with a small slide in inflation, the worsening economic situation, also in Germany, and fear of another credit crunch, there is some chance that the ECB will cut the rates by 0.25% in the upcoming meeting. As long as Spain does not ask for a bailout, the OMT cannot be used to buy bonds. Another LTRO program to lend out money to banks could backfire once again and also buying bonds via the SMP without “conditionality” would be politically difficult at the moment.  A rate cut could weaken the euro.
8. US Trade Balance: Thursday, 13:30. The U.S. trade deficit increased in August to $44.2 billion from $42.5 billion July amid sharp declines in exports prompted by the EU debt crisis and China’s weakening economy. The reading showed the biggest gap since May. Many economists believe the US economy will grow at about 2.0% for the rest of the year. Despite global slowdown the US economy is improving.  The deficit is expected to reach $44.9 billion this time.
9. US Unemployment Claims: Thursday, 13:30. Initials jobless claims improved last week by dropping 9,000 to 363,000. A Labor spokesperson said Superstorm Sandy had no direct effect on the number of applicants since the storm reached after the data was collected. This week a rise in applicants is expected in light of the recent storm. The four-week moving average is maintained below 375,000 for three months, indicating strong hiring. A rise to 373,000 is expected now.
10. US UoM Consumer Sentiment: Friday, 14:55.US consumer confidence improved considerable rising to 83.1 in October, from 78.3 in September. This encouraging data came after the release of the Federal Reserve’s Beige book stating the US economy has been growing modestly and the job market continues to improve. A small decline to 82.6 is expected.

*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 USD/CAD (loonie), check out the  Canadian dollar