Forex Weekly Outlook Aug. 13-17 – Dollar remains dominant, consumer now in focus

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The US Dollar had a positive week against most currencies amid trade headlines. What’s next? The upcoming week features US retail sales and housing data, the Australian jobs report, and top-tier UK data. The  Here are the highlights for the next week.

Trade headlines continued arriving: The US is set to impose tariffs on $16 billion of Chinese goods on August 23rd and China is set to retaliate. The expected news did not have a long-lasting impact. Markets are already eying the bigger duties due on September 6th and are worth $200 billion. The crisis in Turkey became global when the ECB became concerned about European banks’ exposure to Turkey. It triggered a broad risk-off atmosphere on Friday which sent the dollar and the yen higher while all other currencies tanked. US data was mixed as PPI missed expectations but Core CPI beat with 2.4%. In the UK, the government will meet to discuss a no-deal Brexit and this weighed heavily on the pound. German data disappointed but the ebb and flow of the dollar moved EUR/USD more than anything else. The Canadian Dollar enjoyed further progress in NAFTA talks but suffered from a diplomatic spat between Canada and Saudi Arabia. The New Zealand Dollar stood out with major falls as the RBNZ turned dovish.

Updates:
  1. German GDP: Tuesday, 6:00. While we have already received a preliminary estimate of the full euro-zone GDP, we still haven’t heard from the largest country and this happens now.  Europe’s largest economy grew by a relatively disappointing pace of 0.3% q/q in the first quarter of the year after a robust 2017. A slightly higher growth rate of 0.4% is on the cards now.
  2. UK jobs report Tuesday, 8:30. The UK enjoys a low unemployment rate which stood at 4.2% in May but wages are not rising at a satisfactory pace: only 2.5% in May, barely above inflation. The Average Earnings Index is the focus of the report. Both figures are expected to remain unchanged. The change in jobless claims, known in the UK as the Claimant Count Change, rose by a disappointing 7.8K in June. We will now get the fresh figures for July.
  3. UK inflation report: Wednesday, 8:30. The headline Consumer Price Index rose by 2.4% y/y in June, below expectations. The Bank of England still raised rates, but the relatively low level of inflation contributed to the dovish nature of the hike. Core CPI stood at 1.9% y/y and the Retail Price Index (RPI) was at 3.4%. We will now get the figures for July which are forecast to show CPI at 2.5%, Core CPI at 1.9% and the RPI at 3.4%.
  4. US Retail Sales: Wednesday, 12:30. The US consumer is key to the US economy. The headline volume of sales increased by 0.5% in June and is now projected to rise by 0.2%. Core sales rose by 0.4% and carry expectations of rising by the same scale in July. The Retail Sales Control Group, or “core of the core”, remained flat back then and is now expected to advance by 0.4%.
  5. Australian jobs report: Thursday, 1:30. Australia enjoyed a significant gain in jobs in June: 50.9K. This included 41.2K full-time jobs gained and 9.7K part-time jobs, a good composition. The unemployment rate stood at a healthy 5.4% with a participation rate of 65.7%. A more modest gain in jobs is likely now: 15.3K is on the cards. The jobless rate is expected to remain unchanged at 5.4%.
  6. US housing data: Thursday, 12:30. US Building Permits stood at an annualized level of 1.273 million units in June and are now expected to advance to 1.31 million. Housing starts disappointed with 1.17 million and is now projected to move up to 1.27 million in the report for July. In order to see a significant impact on the dollar, both figures need to move in the same direction: either both beating expectations or both falling short.
  7. Canadian inflation: Friday, 12:30. Canada’s headline CPI rose by 0.1% m/m and 2.5% in June, fueled by energy prices. We could see a more moderate increase now. Core CPI advanced by 0.1% m/m as well, but only 1.3% annualized. Canada usually publishes the retail sales report alongside the inflation one. This time is different and allows the CPI data to have its say.
  8. US Consumer Sentiment: Friday, 14:00. The University of Michigan’s Consumer Sentiment Index was relatively stable in recent months, with a final score of 97.9 points in July. We will now get the preliminary estimate for August, which will likely be very similar at 98.1. Higher consumer confidence implies increased consumer spending, but the correlation is not always there.

*All times are GMT

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.