Forex Weekly Outlook Sep. 3-7 – Non-Farm Payrolls and tariffs on China stand out

The US Dollar eventually edged up against most currencies, apart from the yen. What’s next? The Non-Farm Payrolls report is the primary event of a busy week. The US intentions to impose tariffs on China also looms. Here are the highlights for the next week.

Markets cheered the deal reached between Mexico and the US. While Canada’s participation is still in the air. The mood soured later in the week with trouble in emerging markets and concern about global trade. It is going to be a different story with China in the upcoming week. Brexit negotiations with a more upbeat tone after Chief EU Negotiator Michel Barnier said the EU will offer the UK a “deal like no other country.”. Details are yet to emerge.

1. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia has not changed the interest rate in the past two years. This time will unlikely be different. Phillip Lowe and his colleagues are set to maintain the rate at 1.50%. The Australian economy is doing well, despite the risks to growth coming from trade. Housing in Sydney may be a worry and could be mentioned in the statement.
2. US  ISM Manufacturing PMI: Tuesday, 14:00. The forward-looking purchasing managers’ dropped last month. Trade worries weighed on sentiment in July. The 58.1 still represents robust growth, but weaker than beforehand. A modest drop to 57.6 is on the cards. Apart from the headline, it is important to note the Prices component. The Fed watches inflationary pressures.
3. Australian GDP: Wednesday, 1:30. The Australian economy enjoyed a solid growth rate of 1% in Q1 2018, the best since Q4 2016. Q2 will probably see upbeat figures as well: 0.8% q/q is expected. The impact of US tariffs on China was implemented only in Q3, and the preparations may have hastened economic activity beforehand.
4. UK  Services PMI: Wednesday, 8:30. The third and last of the series of Markit’s PMI’s is for the largest sector, the services one. A disappointing score of 53.5 points was recorded in July, with Brexit concerns playing a role in the downturn in sentiment. Another not-so-great growth number may lower Q3 growth expectations. 53.9 is on the cards.
5. Canadian rate decision: Wednesday, 14:00. The Bank of Canada raised the interest rate in its July meeting, as they had telegraphed well in advance. The surprise back then was that they maintained their hawkish bias, despite repeatedly warning about the uncertainty resulting in US  tariffs. This time, Governor Poloz and his colleagues are unlikely to move on the rates, leaving it to a meeting that also consists of a press conference. Nevertheless, they will express themselves in the statement which will likely discuss trade and also recent GDP numbers.
6. New US tariffs on China: Thursday and potentially Friday. In the past two months, the US imposed tariffs on $50 billion worth of Chinese goods. China retaliated with the same scale of duties. A major escalation is on the cards now. September 6th is the deadline for public comments on new tariffs worth a whopping $200 of Chinese products. China imports far less than it exports to the US and is set to hit back with levies of $60 billion of American products but may also cause other disruptions to US companies operating in China. There is always a chance of a delay or a deal, but the Trump Administration seems keen to move forward with a move that would serve as a significant disruption to the global economy. A risk-off atmosphere resulting from the tariffs is due to boost the US dollar and the Japanese yen. A de-escalation will do the opposite.
7. ADP Non-Farm Payrolls: Thursday, 12:15 ADP’s report for private sector jobs surprised to the upside in July with a gain of 219K positions, above the recent averages. A slower pace of hiring is likely now: 189K is projected.
8. ISM Non-Manufacturing PMI: Thursday, 14:00. The services sector saw slower growth than the manufacturing one back in July, with a score of 55.7 points. Growth is still OK according to this but businesses are less-optimistic than they sued to be. An increase to 57 points is on the cards for August. The report serves as a hint towards the Non-Farm Payrolls publication.
9. US Non-Farm Payrolls: Friday, 12:30. The monthly jobs report always gains traction and moves markets. July’s NFP saw a weaker than expected increase in jobs, only 157K, but OK wage growth ate 0.3% m/m and 2.7% y/y. Slightly better figures are likely now: 191K jobs gained and salaries are projected to advance by 0.3% m/m and 2.8% y/y. The unemployment rate is expected to remain unchanged at 3.9%. Markets focus on wages but another weak gain in positions could shift the attention back to the headline change in jobs. This is the last NFP report before the Fed convenes later in September.
10. Canadian jobs report Friday, 12:30. Canada reported a whopping gain of 54.1K jobs in July, but this concealed a loss of full-time jobs and a leap in part-time jobs. In addition, wages disappointed by reverting back down after two good months. The unemployment rate stood at 5.8%. In August, we can expect a more modest increase in positions: 5.1K. The jobless rate acrries expectations for an increase 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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