The US dollar continued suffering against major currencies, while it managed to recover against commodity currencies in a volatile week. The top events for the coming week are: the FOMC meeting, US housing data, retail sales, ADP employment and inflation data. In addition, we have rate decisions in Japan and New Zealand among other events.Here is an outlook on the key events this week.
The belated Non Farm Payrolls were a big disappointment, with a gain of only 148K jobs. If this is what the US could do before the political crisis, how worse will it get afterwards? Durable goods orders were another reason for worry, and only the trade balance seemed OK. The euro was certainly a big winner (despite weak data), while commodity currencies suffered due to Chinese worries, as well as a due correction. Yet again, the pound didn’t realize its potential, despite a strong GDP report. Another exciting week is awaiting us.
- US Pending Home Sales: Monday, 14:00. Pending home sales dropped 1.6% in August following a revised 1.4% decline in July , as fewer contracts were signed to buy previously owned homes. This continuous drop indicates the housing sector is slowing down. Despite improved employment conditions, buyers still face increased mortgage rates, however this slowdown is not expected to last long in cast the employment market continues to grow. A gain of 0.5% is forecast now.
- US retail sales: Tuesday, 12:30. Retail sales were sluggish in August rising 0.2%, less than the 0.5% increase expected and following a 0.4% climb in the previous month. The main rise occurred in automobiles and other long-lasting goods. Despite the mild rise, this was the fifth straight monthly increase, indicating consumer spending is growing. Meanwhile core sales climbed 0.1% following a 0.5% increase in July. Retail sales is expected to climb 0.3%, while Core sales are predicted to gain 0.4%.
- US PPI: Tuesday, 12:30. U.S. producer prices edged up 0.3% in August amid higher energy costs, but underlying inflation remained tame. The rise was followed by a flat reading in July. Analysts expected a smaller increase of 0.2%.On a yearly base, wholesale prices rose 1.4% after advancing 2.1% in July. A rise of 0.2% is expected now.
- US CB Consumer Confidence: Tuesday, 12:30. US consumer confidence declined slightly in September to 79.7, from a revised 81.8 in August, amid fresh concerns about jobs and earnings in the coming months. The reading was broadly in line with market expectations. A further drop to 76 is anticipated this time.
- US ADP Non-Farm Employment Change: Wednesday, 12:15, U.S. private sector employers added only 166,000 jobs in September, while economists expected ADP National Employment Report to show 180,000 jobs. This worsening will compel the Fed to continue monetary easing. Furthermore, the government shutdown will have a negative impact on the US economy including the labor market. A smaller addition of 151,000 is predicted now. As the official NFP will be postponed once again, the ADP report is of high importance.
- US inflation data: Wednesday, 12:30. U.S. consumer prices rose 0.1% in August, indicating inflation is tame and may facilitate future tapering. Core CPI also increased 0.1% following a 0.2% rise in each of the past three months. Core consumer prices are expected to climb 0.2%.
- US FOMC Statement: Wednesday, 18:00. The Fed shocked markets by not tapering its QE programs as widely anticipated. Bond purchases remained unchanged at $40 billion in mortgage-backed securities monthly and $45 billion in long-term Treasuries. Rates also remained unchanged at a range of zero to 0.25%. The Fed was concerned about fiscal debt on the economy and about instability in the labor market. Nevertheless the Fed noted that “economic activity has been expanding at a moderate pace.”. No change is expected now, especially as there is no accompanying press conference. Tapering could be pushed back as far as April.
- NZ rate decision: Wednesday, 20:00. The Reserve Bank of NEW Zealand maintained the official cash rate at its record low of 2.5% in September, noting it was likely to rise in 2014. The Bank projected stronger economic activity in the middle of next year, expecting annual growth of 2.8% in March 2014. No change in rates is expected.
- Japanese rate decision: Thursday. The Bank of Japan kept its monetary policy unchanged in October and increased its assessment on capital expenditure, due to optimistic signs that its stimulus policy was starting to take effect. The BOJ voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion ($617 billion) to 70 trillion yen. Japan monetary policy and cash rate are expected to remain unchanged.
- Canadian GDP: Thursday, 12:30. The Canadian economy expanded at fastest pace July 2012, growing 0.6% following a 0.5% contraction in the previous month. The Bank of Canada projected the economy will be choppy in the near term, but expected growth will reach 1.8% for 2013. The BoC has maintained the target interest rate at 1% as the 1.1% inflation rate reported in August was well below the bank’s 2.0% inflation target. The BOC also removed its hawkish bias and hurt the C$. The Canadian economy is expected to expand 0.2% this time.
- US Unemployment Claims: Thursday, 12:30. Initial claims for unemployment benefits dropped 12,000 last week, reaching 350,000. The reading was broadly in line with predictions for 343,000 claims. Nevertheless, the private sector held steady during the shutdown period, which is a good sign for the US employment market. This figure does not include the federal workers who filed for unemployment benefits in a different program. The full extent of the shutdown damage inflicted on the US economy will be revealed only months from now. A reduction to 344,000 is anticipated now.
- US ISM Manufacturing PMI: Friday, 14:00. Manufacturing unexpectedly edged up in September to 56.2, from 55.7 in August, the strongest rise since April 2011. A pickup in investment and stronger construction activity from the housing recovery contributed to this rise. Analysts expected a smaller climb to 55.3. However the recent government shutdown may take its toll on the US manufacturers. Manufacturing PMI is expected to expand to 55.3.
*All times are GMT.
That’s it for the major events this week. Stay tuned for coverage on specific currencies.
- 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