Forex Weekly Outlook October 1-5 – Non-Farm Payrolls eyed after the Fed-fest

The Federal Reserve rattled markets in an interesting week that ended with teh US Dollar on top. What’s next? The first week of Q4 sees a buildup to the US Non-Farm Payrolls as well as other events. Here are the highlights for the next week.

The Federal Reserve raised rates as expected and left its forecasts for another one this year and three in the next unchanged. The FOMC Statement did not include the words “accommodative policy”. The greenback initially dipped on thoughts that the Fed is nearing the end of the road. Chair Jerome Powell then clarified that there is no change in policy and that the economy is doing very well. Elsewhere, the battle over Italy’s budget resulted in a victory for the populists and sent the euro down. There was no breakthrough in Brexit negotiations as the UK government remains torn and as the EU is preparing for a no-deal scenario. The US is advancing towards finalizing an agreement with Mexico and leaving Canada out. The RBNZ left interest rates unchanged and did not share the pessimism from the business community.

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1. ISM Manufacturing PMI: Monday, 14:00. This forward-looking survey is not only a gauge of the sector but also a hint to Friday’s Non-Farm Payrolls and includes a hint for inflation. August was excellent with a score of 61.3, an impressive number. The Prices component stood at 72.1, even higher, but above the peak seen earlier in the year. A score of 60.1 points is expected for September.
2. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia has not changed its interest rates for over two years and this event will be no different according to all the signs. The Australian economy is doing OK, but not accelerating. Concerns about demand from Asia weighs on sentiment. Any change in the wording regarding the exchange rate or inflation may have an impact on the Aussie dollar.
3. Jerome Powell speaks: Tuesday, 16:00. The Chair of the Federal Reserve will deliver a speech, his third public appearance in a week. While it is unlikely Powell will have something new to say, his words always move the markets.
4. UK Services PMI: Wednesday, 8:30. The third and final purchasing managers’ indicator from Markit is for the largest sector: the services one. Back in August, the number slightly surprised with 54.3 points, reflecting OK growth. It will be interesting to see if concerns about Brexit adversely impact the result. A score of 54 points is on the cards.
5. US ADP Non-Farm Payrolls: Wednesday, 12:15. The precursor to Friday’s official jobs report is back to the original day: Wednesday. Back in August, ADP’s private sector report disappointed with 163K, below the averages. We can expect a better outcome this time. An increase of 187K private sector jobs is projected for September.
6. US ISM Non-Manufacturing PMI: Wednesday, 14:00. ISM’s services sector survey also beat expectations in August by advancing to 58.5 points. An upbeat number is likely also for September. The release is the last hint before the NFP. A similar level of 58.1 points is on the cards.
7. US Non-Farm Payrolls: Friday, 12:30. The “king of forex indicators” has seen the focus shift from headline jobs to wages in recent years. The NFP for August was upbeat with 201K jobs gained and an impressive increase in wages: 0.4% MoM and 2.9% YoY, both beating projections. Will we see another robust month? A slightly smaller increase in jobs is expected, 188K, while annual wage growth carries expectations for an acceleration to 3%. Month over month wage growth carries expectations for a rise of 0.3%. The unemployment rate is expected to drop from 3.9% to 3.8%.
8. Canadian jobs report Friday, 12:30. Canada”s  recent jobs report was awful with a drop of 51.6K positions but it came after a gain of 54.1K beforehand. Will we see a stable number this time. The unemployment rate increased to 6%, worse than had been expected. We could see a slide here. A gain of 32.5K positions is not he cards while the unemployment is expected to slide to 5.9%.

*All times are GMT

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Further reading:

• EUR/USD forecast – for everything related to the euro.
• GBP/USD forecast – Pound/dollar analysis
• USD/JPY forecast – the outlook for dollar/yen
• AUD/USD forecast – projections for the Aussie dollar.
• USD/CADc forecast – Canadian dollar predictions

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