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Majors, US Dollar Forecast

Forex Weekly Outlook August 11-15

The US dollar and the Japanese yen were the winners in a week which saw mounting geopolitical fear and lots of action.  German Economic Sentiment; UK employment data; Mark Carney’s speech and inflation report; US unemployment claims, PPI, consumer sentiment are the major topics in Forex calendar. Here is an outlook on the main market movers for this week.

The US economy showed its strength  with an excellent ISM Non-Manufacturing PMI release climbing to 58.7  The employment component is up and weekly jobless claims were below 300K once again. The yen rode higher on geopolitics: counter-sanctions from Russia, a deterioration in Iraq and also a  breakdown of the ceasefire in Gaza. The euro suffered from Draghi’s comments, weak German data and an Italian recession. Weak manufacturing hit the British pound and all commodity currencies were hit by unexciting employment data.  This is certainly a hot summer.

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  1. German ZEW Economic Sentiment: Tuesday, 9:00. German analyst and investor climate continued to decline in July, falling to 27.1 points from June’s 29.8. Economists expected a higher reading of 28.9. Current conditions index also fell to 61.8 points from 67.7 in May, however still positive indicating a shift towards a domestically driven recovery in Germany. Nevertheless, the second quarter growth rate is expected to be lower than registered in the first quarter. This decline will also affect the Eurozone growth rate. German analyst and investor index is expected to plunge to 18.2.
  2. US  JOLTS Job Openings: Tuesday, 14:00.  While this is a figure for June, it is still of high importance as the Fed watches it closely. The number of job openings rose to 4.64 million in May, and it is now predicted to advance to 4.74 million, showing further strength in the job market.
  3. UK employment data: Wednesday, 8:30. The Unemployment rate in Britain fell to 6.5% from March to May, reaching following 6.6% in the previous three months. The number jobseeker’s fell by 36,300 to 1.04 million. Prime Minister David Cameron noted that the rate of employment matched the record level set in 2005, indicating stronger British economy. However wage growth is at its lowest since 2009, while excluding bonuses average wage increases are their lowest since 2001. If this trend continues it will have a negative effect on economic growth. The number of jobless Britons  is forecasted to decline 29,700 and the unemployment rate is expected to drop to 6.4%.
  4. BOE Inflation Report: Wednesday, 9:30. Bank of England governor Mark Carney will hold a press conference in London about the inflation report. The Governor stated he was pleased with the rise in inflation, noting it came close to the BOE’s target of 2%. Market volatility is expected as Carney used previous reports to state out policy, making this quarterly event more important than the rate decisions.
  5. US retail sales: Wednesday, 12:30. Retail sales in the U.S. advanced solidly in June. Core sales, excluding automobiles, gasoline, building materials and food services, edged up 0.6% following a revised 0.2% in May. Core sales are the best gauge for consumer spending component of gross domestic product. June’s gains indicate an upward trend in consumer spending in the second quarter. However retail sales gained only 0.2% in June after posting a 0.5% rise in May. Retail sales are expected to gain 0.2%, while core sales are predicted to edge up 0.4%.
  6. German GDP: Thursday, 6:00. After Italy entered a recession and German industrial output disappointed, all eyes are on the euro-zone’s locomotive.  The German economy is expected to squeeze by 0.1% in Q2 after growing very nicely at 0.8% in Q1.  France is expected to grow by 0.1%, the same as all of the euro-zone. A small miss in German numbers could result in no growth for the zone.
  7. US Unemployment Claims: Thursday, 12:30. The number of US initial Jobless claims fell 14,000 last week to a seasonally adjusted 289,000. The reading was well below the 305,000 forecast by analysts, indicating the US labor market continues to improve strengthening the US economy. The four-week average declined 4,000 to 293,500. That’s the lowest average since February 2006. The number of workers continues to grow as well as higher waged which will boost consumer spending in the coming months. The number of initial jobless claims is expected to reach 307,000 this time.
  8. UK GDP data: Friday, 8:30. Britain’s GDP for  the second quarter is expected to confirm the the first estimate issued in July and show a quarterly gain of 0.8%. The anticipated advance marches the UK economy to pre-recession levels. The positive forecast indicates, recovery is back on track, but wage growth needs to rise in order to sustain long term recovery. The second GDP estimate is expec6ted to remain unchanged at 0.8% growth rate.
  9. US PPI: Friday, 12:30. U.S. producer prices edged up 0.4% in June amid rising gasoline costs, but overall inflation remained tame. Analysts expected a smaller rise of 0.2% as posted in the previous month. Gas prices jumped 6.4%, Steel costs edged up 3%. But prices declined for grains, cheese and rental cars to offset some of those increases. Nevertheless, inflation remains tame with in the Fed’s 2% target. Low inflation has enabled the Fed to pursue extraordinary measures to boost the economy but can drag down wages and spark a recession. U.S. producer prices are expected to rise  0.1%.
  10. US UoM Consumer Sentiment: Friday, 12:30. Consumer sentiment declined in July to 81.3 from 82.5 in June amid a fall in the consumer outlook index. Analysts expected the index to reach 83.5.   Current economic conditions rose to 97.1 from 96.6, better than the 97.0 forecast. But consumer expectations plunged for a third straight month, to 71.1 from 73.5 below the 74.0 expected. Consumer sentiment is likely to improve to 82.7.

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

*All times are GMT.

More:  Market Movers Podcast Test Episode #10: ECB past and present, US data run down and current state of oil

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Anat Dror

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer