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Majors, US Dollar Forecast

Forex Weekly Outlook August 17-21

China was in the limelight and this triggered hot summer trading. Will it help or hurt the dollar in the upcoming week? Japan GDP data, Inflation in the UK, the US and Canada and the FOMC Meeting Minutes all stand out. These are our market movers for this week. Join us as we explore the highlights on Forex calendar.

U.S. data released last week raises hopes for a Fed rate hike by the end of the third quarter. Retail sales rebounded in July amid a rise in purchases of automobiles and other goods, suggesting growth rate is positive in the second and third quarters. Retail sales edged up 0.6%, in line with market forecast, while core sales, excluding automobiles gained 0.4%. The robust release added to a strong employment data, suggesting the US economy is on solid footing. Will this trend continue?  Let’s start:

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  1. Japan GDP data: Sunday, 23:50. Japan’s economy recovered from the brief tax-induced recession in 2014, with GDP growth of 0.6% in the first quarter, exceeding market forecasts of 0.4% expansion rate. On a yearly base, GDP grew 2.4%, way above the 1.6% rise expected by analysts. Domestic consumption edged up 4.3% and wage growth increased, indicating a positive momentum. Exports increased 10% due to the weaker yen, but inflation continues to fail, despite the massive money-printing program aimed to lift inflation. Economists estimate a 0.5% contraction in the second quarter.
  2. UK Inflation data: Tuesday, 8:30. UK Inflation index inflation fell to 0% in June, from 0.1% in the prior month due to a decline in clothing and food prices as well as air fares. Bank of England governor Mark Carney expects inflation to remain low in the coming months, but anticipates a pick-up by the end of this year. However, rising wages expected to increase consumption, leading to stronger inflation pressure. UK CPI is expected to remain flat this time. The BOE is watching.
  3. US Building Permits: Tuesday, 12:30. The number of building permits issued in June edged up 7.4% to a 1.34 million-unit rate, the highest level since July 2007. Builders’ confidence also reached a 9-1/2-year high in July, indicating the housing market is expected to expand further in the coming months. Economists forecast that the housing market will compensate for the struggling manufacturing sector. The number of permits is expected to reach 1.21million in July.
  4. US Inflation data: Wednesday, 12:30. U.S. consumer prices increased 0.3% in June, rising for the fifth consecutive time after a rebound in gasoline prices as well as a range of other goods indicating inflation is back in track. The recent positive economic data such as the growth trend in the housing market raises the odds for a rate hike in the near future. June’s gain was preceded by a 0.4% in May. Both CPI and Core CPI are expected to gain 0.2% this time. Core PCE ticked up. Will CPI follow?
  5. US FOMC Meeting Minutes: Wednesday, 18:00.  In the July  FOMC meeting the Fed left all its options on the table. There is a clear divide by the ongoing improvement in the job market and the sluggish inflation picture. The minutes could reveal how wide the gaps are between the hawks and the doves, and how real a September hike is.
  6. Japan rate decision: Thursday. Aug 7 The Bank of Japan kept its accommodative monetary policy, aiming toward 2% inflation without additional monetary easing. However, economists believe the 2% deadline may be changed, depending on future oil price moves. The weak yen is positive for exports and companies but is bad for households and small firms via rising import costs. Household sentiment picked up and Consumer spending remained string after emerging from a temporary hit from bad weather. Given the Chinese yuan devaluation, this meeting will be watched more closely.
  7. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits increased unexpectedly by 5,000 last week, reaching 274,000. However, the general trend remains positive, indicating the US labor market continues to strengthen. Analysts expected claims to reach 272,000, but the number of new claims continue to stay below the 300,000 threshold and the four-week moving average of claims fell 1,750 to 266,250, the lowest since April 2000. The number if new claims are expected to reach 272,000 this week.
  8. US Philly Fed Manufacturing Index: Thursday, 14:00. Philadelphia’s manufacturing gauge for the region plunged in June to 5.7 from 15.2 in June. The reading was worse than the 12.5 points estimated earlier but still indication expansion. The strong dollar and softer global demand lowered the number of orders for manufactured goods. Economists expect a meaningful rebound in the next few months. New orders reached 7.1, from 15.2 and employment remained flat. Philadelphia’s manufacturing index is expected to reach 7.2 in July.

*All times are GMT.

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

In our later podcast we discuss predictable currencies vs. unpredictable central banks.

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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