Forex Weekly Outlook July 9-13 2012

The US dollar made sharp gains as the global slowdown dampened the mood. Mario Draghi’s speech, the US FOMC Meeting Minutes and US unemployment claims are just a few of our market-movers this week. Here is an outlook on the main events to shape Forex trading in the coming days.

US Non-Farm Payrolls  gained only 80K  despite the encouraging indicators released earlier. Economists expected a larger gain of 97,000 jobs but this disappointing figure did not lift unemployment rate which remained at 8.2%.  On the whole, the report is not a disaster but this disappointment joined the already gloomy mood that began as three important central banks announced easing measures, reflecting a worsening environment. The ECB cut had the strongest impact. Let’s see what’s in store for us this week.

1. Japan Current Account: Sunday, 23:50. The Japanese Adjusted Current Account index narrowed its surplus to 0.29T in April, following a surplus of 0.79T in March. Economists expected a larger surplus of 0.62T. Overseas trade is getting weaker day by day, badly affecting Japan’s trade balance surplus and GDP growth. However domestic demand is getting stronger providing a modest contribution to Japan’s economic growth. A small rise to a surplus of 0.42T is expected now.
2. Mario Draghi Speaks: Monday, 12:30. ECB President Mario Draghi is scheduled to speak at European Parliament, in Brussels where he is likely to discuss the recent ECB rate cut and other urgent topics including the worsening situation in Greece. His words will cause volatility in the market. His recent words about “materializing downside risks” added fuel to the fire.
3. US Trade Balance: Wednesday, 12:30. The U.S. trade deficit contracted in April to $50.1 billion from March’s record level to $182.9 billion amid slower imports due to the slowdown in the US economy. Exports also declined in light of deteriorating economic conditions in Europe and in China. A further contraction to a deficit of 48.6 billion is expected this time
4. US FOMC Meeting Minutes: Wednesday, 18:00. In the last meeting in June, the Fed decided to extend Operation Twist and didn’t announce QE3. Analysts were split if this move was a substitute to QE3 that will never happen, or a stepping stone towards such a move of printing more dollars. The meeting minutes will reveal some of the internal discussions and might provide a hint towards the next meeting at the end of the month.
5. Australian employment data: Thursday, 1:30.  The  Australian economy added 38,900 jobs in May, following 7000 addition in April, contrary to predictions of a 2,200 contraction. However, the unemployment rate increased unexpectedly to 5.1%, despite the impressive job creation. The majority  of workers  are full-time  laborers indicating Australian economy is improving. A small increase of 300 jobs and higher unemployment rate of 5.2% are predicted now. Australia is vulnerable to worsening Chinese conditions.
6. Japanese rate decision: Thursday. The Bank of Japan refrained from taking additional easing measures in its last meeting leaving room for action in case a further deterioration occurs in the European debt crisis. The rate remained in a 0.0%-0.1% range and the asset purchase program at Y70 trillion. No change in policy is expected.
7. US Unemployment claims: Thursday, 12:30. The number of Americans filing new unemployment claims dropped more than expected last week reaching 374,000 fro,388,000 in the week before. The figure posted was considerable lower than the 385,000 predicted by economists. The four-week moving average of new unemployment claims, decreased by 1,500, margin to 385,750 from the previous week’s revised average of 387,250. Moreover, the four-week average of new unemployment claims stayed below the 400,000 line since October 2011 suggesting an improvement trend in the Unemployment rate. A small rise to 379,000 is anticipated.
8. US Federal Budget Balance: Thursday, 18:00. Federal Budget flipped again to a deficit of  $125 billion in May broadly in line with predictions, following a rare surplus of 59.1 billion in April. May’s deficit was more than twice the level registered in the same month last year. An improvement to a deficit of $109.7 billion is predicted now.
9. US PPI: Friday, 12:30. The  producer price index for finished goods  dropped 1.0% in May following 0.2% decline in April. This was the largest one-month decline since July 2009. Economists expected a drop of 0.6%. On the other hand, core prices increased yet again rising 0.2% following a 0.2% rise in April. Another decline of 0.5% is forecasted.
10. US UoM Consumer Sentiment: Friday, 13:55.University of Michigan  consumer  sentiment  index dropped in June to 74.1 compared to79.3 in May. Economists expected a smaller decline to 77.5. The probable causes for this drop are the slowdown in the US economy and the deterioration in the US job market. Another decline to 73.5 is anticipated this time.

*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 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.