Forex Weekly Outlook July 8-12

The US dollar surged for yet another week, enjoying encouraging US data. Many important events are on our calendar this week including: The Eurogroup Meetings, FOMC Meeting Minutes and Bernanke’s speech, as well as the rate decision in Japan and US unemployment claims. Here is an outlook on the market-movers awaiting us.

US Non-Farm Payrolls gained 195K in June, beating expectations for a 167K addition. This rise was preceded by the same gain in May, after data was revised to the upside. We now have job gains of nearly 200K in the past three months. On the other side of the Atlantic, the bias is totally different: Draghi “injected a downward bias into all interest rates” by launching forward guidance. And in the UK, Mark Carney made his mark by issuing a dovish statement. Both currencies fellIs the dollar unstoppable now? Let’s start.

Another overview:  Euro and sterling remain under pressure, dollar appreciates; What to expect this week?

1. Euro-zone Eurogroup Meetings: Monday. The Eurogroup meetings comprised of 17 Euro-area member states will gather in in Brussels to discuss and assess the situation in Greece before approving the next bail out installment of €8.1bn from the Eurozone countries. Greece is required to reassure its lenders it meets all requirements including severe reforms, not an easy task for the Greek officials. The political issues in Portugal also weigh.
2. Mario Draghi speaks: Monday, 13:30.  Mario Draghi President of the ECB is expected to speak on Economic and Monetary Affairs of the European Parliament, in Brussels. His words will cause volatility in the markets in light of his recent talk about the ECB’s intention to control rates. He could be asked about the “extended period of time” regarding rates and the negative deposit rate.
3. US FOMC Meeting Minutes: Wednesday, 18:00. The recent decision by the Fed was quite dramatic: not only did they see “downside risks as diminishing” but they also enabled Bernanke to discuss tapering of QE, the 7% unemployment rate for ending QE and a possible end to QE in mid 2014. We already know there has been one hawkish dissenter and one dovish one. We will now receive more interesting information about the Fed’s thinking.
4. Ben Bernanke Speaks: Wednesday, 18:10. Fed Chairman Ben Bernanke will speak in Cambridge, on the central bank’s 100-year history, its policy record, lessons learned and prospects for the future. The markets anticipate hints on possible monetary policy shifts such as the expected cuts in monetary stimulus. The Fed will answer questions from the audience after delivering his speech, which might trigger interesting hints. This is the first appearance after the excellent NFP.
5. Australian employment data: Thursday, 1:30. Australian job market added a modest 1,100 jobs but unemployment declined slightly to 5.5%. The drop in the unemployment rate was probably related to the fall in the participation rate since job increase was nearly non-existent in May. A   small addition of 30 jobs is expected while unemployment is predicted to rise to 5.6%. The Aussie is very close to 0.90 after the recent tumble.
6. Japan Rate decision: Thursday. The Central bank of Japan decided to leave rates at the minimum low of 0-10% and said it will consider new measures to calm markets  if borrowing costs jump again in the future. Rising bond market yields increased concerns for higher borrowing costs, but Kuroda told the BOJ will intervene to prevent such an increase. No change in rates is predicted.
7. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial applications for unemployment benefits dropped 5,000 to a seasonally adjusted 343,000 last week, indicating employers are hiring at modest pace, but the job market is picking up. ADP reported businesses expanded by 188,000 jobs in June, up from 134,000 in May. The Construction sector added 21,000 jobs, suggesting the housing recovery is boosting hiring. Small businesses – those with less than 50 employees – added 84,000 jobs. Another decline to 336,000 is projected.
8. US PPI  : Friday, 12:30. The U.S. Producer Price Index for finished goods edged up 0.5% in May rising for the first time in three months, after a 0.7% fall in April. The increase was due to higher gasoline prices. Economists expected the producer price index to rise 0.1%. Meanwhile Core PPI excluding food and energy, advanced 0.1%. The same rise of 0.5% is anticipated this time.
9. US UoM Consumer Sentiment: Friday, 13:55. US consumer confidence remained high in July reaching 82.7 after a climb to 84.1 in June. Higher home prices boosted household wealth raising optimism among American consumers. Consumer sentiment is of high importance since it is later converted to consumer spending which accounts for 70% of economic growth. Another improvement to 85.3 is likely.

*All times are GMT.

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

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