Forex Weekly Outlook August 15-19

The US dollar had a volatile week and not everything is calm this summer. Inflation figures from the UK and the US, Employment data from the UK, New Zealand and Australia and the Fed’s minutes all stand out These are the highlights on forex calendar. Join us as we explore the market movers for this week.

After the US enjoyed good data in the previous week, the retail sales report was a big disappointment. The US consumer  did not spend as much as expected and consumer confidence is hardly rising. If  anyone thought that a rate hike was coming soon, it’s time for another pushback.  Let’s start,

1. Japan GDP data: Sun, 23:50. The preliminary GDP release showed Japan has dodged a recession with a quarterly gain of 0.4% in the first three months of 2016. The annualized growth showed a 1.7% rise in the first quarter. The rise occurred after a 0.3% contraction in the last quarter of 2015. Stronger consumer spending boosted growth. The positive GDP reading may resurface the BOJ plans to raise Japan’s consumption tax again. However Japan’s economy still struggles with the strong yen hurting corporate earnings, wages consumer confidence. Abe’s growth plan did not prove effective in the years following his election. Despite stronger consumer demand, GDP figures suggested the BOJ’s rate policy was having little impact on the economy. GDP growth in the second quarter is expected to be 0.2%.
2. UK inflation data: Tuesday, 8:30. UK’s consumer prices edged up in June by 0.5% after posting lukewarm rates in the previous months. An increase in air fares, rising cost of driving and more expensive computer games pushed up the cost of living.  Following the Brexit vote and the rebound in commodity prices, analysts expect inflation will reach the official 2% target during 2017. UK CPI forecast for July is expected to be 0.5%.
3. German ZEW Economic Sentiment: Tuesday, 9:00. German investor sentiment declined sharply in July to minus 6.8 points from 19.2 registered in June. This was the lowest level since November 2012. The reading was much worse than the 8.2 points forecasted by analysts. The economic and political uncertainty following U.K.’s decision to  leave the European Union was the main cause for this decline. Responders were concerned about the export prospects and the stability of the European banking. Furthermore, ZEW’s indicator of economic sentiment for the euro zone had also declined considerably by 34.9 points to a reading of -14.7 points. German investor moral is expected to reach 2.1 in July.
4. US Building Permits: Tuesday, 12:30. US building permits increased in June, remaining on solid footing at the end of the second quarter. Building permits increased 1.5% to a seasonally adjusted annual pace of 1.153 million units after two months of declines. Furthermore, Housing starts also edged up in June, rising 4.8% to a seasonally adjusted annual rate of 1.189 million units, following a downwardly revised 1.14 million-unit pace posted in May. The strengthening labor market has boosted growth in the housing market, but home building is being constrained by labor and land shortages. The number of permits os expected to rise to 1.16 million-unit pace.
5. US CPI: Tuesday, 12:30. U.S. consumer prices rose for a fourth straight month in June amid higher costs for housing, gasoline, and health care, indicating steadily rising inflation pressures. Consumer Price Index  rose 0.2% in June after a similar rise in the prior month. On a yearly base, CPI advanced 1.0% In the 12 months through June.  Economists expected CPI to rise 0.3% on the month and 1.1% increase from a year ago. The Fed has refrained from raising interest rates mainly due to persistently low inflation. The current inflation rate is 1.6%, still below the 2% inflation target. US inflation is expected to remain flat in July.
6. NZ Employment data: Tuesday, 22:45. New Zealand’s employment market has improved in the first quarter amid a 1.2% rise in job creation from the fourth quarter. Economists expected a lower growth rate of 0.6%. Meanwhile, the  jobless rate  edged up to 5.7% from 5.4% since more people entered the labor force. The participation rate grew at the fastest rate in more than 11 years. Economists believe the employment market still has a spare capacity. However, wages remain subdued due to record immigration, making it easier for employers to fill positions without raising wages. New Zealand’s job market is expected a gain of 0.6% in the second quarter while the unemployment rate is forecasted to decline to 5.3%.
7. UK Employment data: Wednesday, 8:30. The number of Britons filing claims for unemployment benefits rose less than expected in June, increasing 0.4%, following a 12,200 rise in the previous month. This suggests a positive trend in the UK labor market. Furthermore, in the second quarter, the number of people employed rose by 176,000, remaining at a record high of 74.4%. Wages, excluding bonuses, rose by 2.2% compared with the previous year. The labor market continued to strengthen in spring 2016, with record employment and the unemployment rate at its lowest since 2005. The number of unemployed is expected to grow by 5,200 this time.
8. US Crude Oil Inventories: Wednesday, 14:30. US  Crude inventories edged up by 1.1 million barrels last week while expected to decline 1.3 million barrels. Economists fear that a continued increase in stocks may result in a renewed fall of oil prices. For more than two years, strong oil production from the Organization of the Petroleum Exporting Countries and those outside the bloc created large inventories, causing prices to plunge below $30 a barrel earlier this year. Since then, production has stabilized and prices rebounded. However, with the current rally in oil inventories, things could take a turn for the worse.
9. US FOMC Meeting Minutes: Wednesday, 18:00. These are minuts for the July meeting, in which the Fed did not change policy. While they did acknowledge and improvement in the economy, they remain very cautious. We now get to see the internal debate within this report. And while the meeting was held in late July, the minutes document is revised until the last moment, and could reflect the current tone of the Fed
10. Australia employment data: Thursday, 1:30. Australian labor market growth added a smaller than expected number of jobs in June, while the unemployment rate inched up to 5.8% from 5.7% in the previous month, in line with market forecast. The Australian job market added 7,900 jobs, falling short of the 10,000 rise anticipated by analysts. However, the unemployment rate ticked up due to a rise in the labor participation rate, rising to 67.9. Full-time positions have increased compared to part time jobs, increasing 38,400 vs. 30,600 part time positions suggesting a positive shift. The labor market is expected to expand by 10,200 jobs and the unemployment is expected to remain at 5.8%.
11. US Philly Fed Manufacturing Index: Thursday, 12:30. The Philadelphia area manufacturing index deteriorated to minus 2.9 in July after a 4.7 point gain in the previous month. New orders jumped 11.8 points from two months contraction on improvement of backlog orders surging from minus 12.6 to plus 1.9 for the first positive reading in a year. The surge in orders is a good sign for future growth in shipments and employment. Shipments increased to 6.3 for the first positive reading since March. But employment remained weak, at minus 1.6. Despite the low reading, this report offers hope for a strong reading in July. August’s manufacturing index  is expected to reach 1.4 points.
12. US Unemployment claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits declined last week to 266,000, indicating the labor market remains strong in early August supporting economic growth. The number of claims in the week before was revised down by 2,000 to 267,000. Claims have remained below 300,000 for 75 straight weeks. The four-week average of claims increased 3,000 to 262,750 last week. The strong labor market is boosting consumer spending spurring economic growth. The number of new claims is expected to be 269,000 this week.

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

*All times are GMT.

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
• For the Swiss Franc, see the  USD/CHF forecast.