Forex Weekly Outlook October 1-5

The US dollar was able to advance for a second week in a row, as concerns over global growth intensified. As a new month and a new quarter begin ,the calendar is very busy. US employment figures including the ADP Non-Farm Employment Change, Unemployment claims and the important NFP release together with rate decisions in the UK, the Euro-zone and Japan are the main market movers on our list. Here is an outlook on the main market-movers to shape forex trading this week.

Last week Final GDP was downwardly revised to 1.3% in the second quarter from last month’s estimate of 1.7%. This was the lowest reading since the third quarter of 2011 suggesting a sluggish economic recovery. However there were a few pleasant surprises last week with a 26,000 drop in jobless claims to 359K and CB Consumer Confidence unexpectedly climbing to 70.3 in September from 61.3 in August. Will the QE3 bail out the US economy from its slow recovery? In Europe, the supposedly positive news from Spain doesn’t seem to convince many.

US ISM Manufacturing PMI: Monday, 14:00. Manufacturing activity declined for the third consecutive month reaching 49.6 in August after posing 49.8 in July. Analysts expected the index to drop 0.2% to 50.0. This contraction suggests a slowdown trend in the US economy. An increase to 50.0 is expected.
Ben Bernanke speaks: Monday, 16:30.Chairman of the Federal Reserve Ben Bernanke will speak in Indianapolis regarding the new QE3 monetary stimulus. His words cause volatility in the market.
Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia maintained its cash rate at 3.5%, in line with expectations, despite a recent drop in iron ore prices,Australia’s biggest export. Prices of iron ore fell by a third in the last two months resulting in strains across Australia’s economy. No change is expected this time.
US ADP Non-Farm Employment Change: Wednesday, 12:15. U.S. non-farm private employment edged up more-than-expected in August by a seasonally adjusted 201,000 after a reported increase of173,000 in July. Economists expected a lower gain of 142,000 jobs. Nevertheless this rise did not correlate with the disappointing NFP figures released by the end of that week. ADP non-farm is forecasted to reach 141,000.
US ISM Non-Manufacturing PMI: Wednesday, 14:00. The U.S. services sector climbed modestly in August to 53.7 from 52.6 in July indicating expansion. Analysts expected the index to reach 52.5. This correlates with the ADP NFP job growth, directly connected to business activity. A small drop to 53.3 is expected now.
US FOMC Meeting Minutes: Wednesday, 18:00. The Fed decided to leave rates unchanged until mid-2015 and provided another round of quantitative easing dubbed QE3. The Fed will purchase additional mortgage-backed securities at a rate of $40 billion per month with no official end date. The Fed was concerned over the slowdown in the labor market and its negative effects on US growth prospects. The new QE3 is expected to boost the US economy and spur job growth. We will now get more insight about this important decision, perhaps more than we got from Bernanke, which told us to look at the big picture of unemployment – a not so pretty one.
UK rate decision: Thursday, 11:00. The Bank of England decided to leave its cash rate at 0.50% as well as continue its asset purchase program totaling 375 billion pounds. The minutes also revealed the BOE is likely to authorize another 50 billion pounds of government bond purchases in November. No change is anticipated at this decision.
Euro-Zone rate decision: Thursday, 11:45. There is a good chance that the ECB will cut the main lending rate by 0.25% as the economic situation continues deteriorating, and after it focused on the OMT in last month’s meeting. Signs of weakness are seen also in important indicators in core countries. In the press conference, Mario Draghi will likely focus on aspects of the OMT. Contrary to the LTRO, he will probably refrain from tapping himself on the back, despite already seeing lower bond yields.
US Unemployment Claims: Thursday, 12:30. Initial jobless claims dropped sharply last week to 359,000, down 26,000 from the previous week. Seasonal factors may be behind this decline. The seasonally adjusted 4-week moving average was374,000 in the September, 4,500 less than in the previous week. A rise to 371,000 is expected now.
Japan rate decision: Friday. The Japanese Central Bank decided to joined the Federal Reserve offering new monetary stimulus to boost economic growth. The Bank of Japan expanded its asset purchase program by ¥10 trillion to a total of ¥80 trillion by buying treasury bills and Japanese government bonds. The BoJ left its overnight call rate unchanged at 0% to 0.1%. These measures are meant to spur economic activity both in businesses and in households as well as fight deflation. No change is forecast.
Canadian employment data: Friday, 12:30. The Canadian economy added 34,300 jobs in August, offsetting the 30,400 positions lost in July. The gains topped expectations of a 10,000 growth. All the job additions were part time, compensating on part-time losses in July. The unemployment rate remained at 7.3%, in line with expectations. Despite the relatively good condition of the Canadian market, Finance Minister Flaherty warned against downside risks outside Canada from the part of Europe or the United States, to which Canada is not immune. An addition of 15,300 jobs is expected with the same unemployment rate of 7.3%.
US Non-Farm Employment Change: Friday, 12:30. US Job growth disappointed in August, with a 96,000 job addition, following 000 in the previous month. Economists expected a 123,000 climb setting the stage for the Federal Reserve QE3 announcement. The drop in the unemployment rate does not reflect a positive change since labor force participation also declined. US job market is predicted to gain 112,000 jobs.
US Unemployment Rate: Friday, 12:30. Many people gave up looking for jobs therefore are not registered as unemployed. The sluggish hiring is hoped to mend by the new round of QE3 announced after this release. An increase to 8.2% is forecast.

*All times are GMT.

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

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer Anat's Google Profile

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