After one of the most volatile weeks in many months, the markets will start the week with the historic downgrade of the US by S&P. This happened over the weekend. Bernanke will have a chance to react at the FOMC meeting. In addition, we have the Federal Budget Balance and retail sales in the US, Australian employment figures, and more. Here is an outlook on the market-movers lined up this week.
Last week ADP Non-Farm Payrolls provided some good news with an unexpected increase of 114,000 new jobs in the private sector and with further improvement in the unemployment claims dropping to the 400,000 line. This was finally translated into a good Non-Farm Payrolls report: edged up above expectations to 117,000 and the unemployment rate dropped to 9.1% below the 9.2% predicted indicating promising news for the US job market. Will this trend continue?
And while we don’t have any major European releases this week, the drama around the debt crisis is set to continue: Trichet made hesitant moves in the bond markets. This turned into a crash later on. Eventually, we saw Trichet bending Berlusconi’s arm and forcing new austerity measures on Italy, in return for an intervention to lower Italian yields. The drama around Spain and Italy is set to continue.
OK: Let’s start
- US Rate decision: Tuesday, 18:15. Te Federal Open Market Committee kept the federal funds rate at 0 to 0.25% indicating that recovery is continuing at a modest pace unlike former predictions. Household spending and commercial investments increased but housing industry remains weak with elevated unemployment rate. The same rate was maintained.
- US Federal Budget Balance: Wednesday, 18:00. The Gap between Federal spending and income narrowed unexpectedly in June reaching -43.1B. This reading came two weeks before the Treasury’s August 2nd debt ceiling deadline. Following bitter disagreements between Democrats and Republicans a temporary truce was called with an agreement to raise the debt ceiling to $2.4% trillion with expensive cuts of $2.4% trillion in the next 10 years together with $900 billion cuts enacted immediately. However the fights are likely to resume once the current budget expires on Sept. 30. The gap is expected to widen to -140.3M.
- Australian Employment data: Thursday, 1:30. Australian economy added a remarkable number of 23,400 new jobs while an increase of 15,200 was expected. The rise was led by an increase in full time positions. Meantime, unemployment rate was remained at 4.9%. The economy is expected to add 10,300 jobs and unemployment rate is predicted to remain 4.9%.
- US Trade Balance: Thursday, 12:30. The U.S. trade deficit edged up in May to $50.2 billion the highest level in 31 months due to rising oil prices Analysts expected deficit to grow to $44.1 billion. A further increase of deficit to $47.5 billion is expected now.
- US Unemployment Claims: Thursday, 12:30. The number of Americans claiming initial unemployment benefits dropped slightly last week to 400,000 better than the 404,000 expected indicating an ongoing moderate improvement in the U.S. job market. However the high unemployment rate clouds the job market. A small increase to 402,000 is predicted.
- US Retail sales: Friday, 12:30. U.S. Retail sales gained 0.1% in June following 0.1% decrease in the previous month. July sales will be better due to the back-to-school season which is the second largest selling period, but discounts will narrow profits. Economists predict around 4.3% rise in July. Meantime Core retail sales was flat in June after 0.2% gain in the previous month and is also expected to rise in July. Retail sales is expected to grow by 0.4% whilt Core sales are predicted to increase by 0.2%.
- US Prelim UoM Consumer Sentiment: Friday, 13:55. Preliminary reading of theUniversity ofMichigan consumer sentiment showed a plunge to 63.8 from71.5 in June while analysts expected a rise to 72.5. The debt ceiling crisis is the probable cause for the general unease in consumer sentiment. Following the agreement reached in congress regarding the raise of debt ceiling and extensive cuts figures are expected to go up again. A small decrease to 63.3 is forecasted.
That’s it for the major events this week. Stay tuned for coverage on specific currencies
*All times are GMT.
- 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.