Forex Weekly Outlook Sep. 7-11 – Central bank rate decisions and GDP in focus

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The upcoming week features central bank rate decisions from the ECB and the Bank of Canada. We’ll get a look at GDP data in the UK, the eurozone and Japan.

German CPI declined by 0.1%, the third decline in the past four months. Eurozone CPI fell by 0.2%, as deflation in the bloc remains a serious concern.

In Australia, the RBA held rates at 0.25%, where they have been pegged since March. The economy contracted by some 7.0% in Q2, marking the worst quarter on record, as the coronavirus hampered business activity. With GDP falling for a second straight quarter, the country is officially in a recession.

In the US, last week’s numbers were positive. Manufacturing PMI improved to 56.0, up from 54.2 points. The Services PMI also pointed to expansion, but slowed to 56.9, down from 58.1 beforehand. Unemployment claims dropped below the 1-million mark with a reading of 886 thousand. Nonfarm payrolls slowed to 1.371 million, but was very close to the estimate of 1.374 million. The unemployment rate fell sharply to 8.4%, down from 10.2%. This marked the first single-digit reading since April, prior to the Corvid-19 pandemic. There was more good news from wage growth, which rose from 02% to 0.4%.
  1. Australian ANZ Job Advertisements: Monday, 1:30. The Australia and New Zealand Banking Group employment indicator enjoyed a strong month in July, with a gain of 16.7%. Will we see another gain in the August data?
  2. Japan Final GDP: Monday, 23:50. Analysts are braced for a dismal GDP read in the second quarter, with an estimate of -8.1%. This reflects the sharp deterioration in economic activity as a result of Covid-19.
  3. Eurozone GDP: Tuesday, 9:00. GDP for the second quarter is expected at -12.1%, which would confirm the previous two estimates. Unless the actual release is well off the estimate, reaction to this event will be muted.
  4. Bank of Canada Rate Decision: Wednesday, 14:00. The Canadian economy is showing signs of recovery, but the BoC is unlikely to change rate levels anytime soon. We can expect the bank to maintain rates at 0.25%, where they have been pegged since March. The tone of the rate statement could affect the movement of USD/CAD.
  5. ECB Rate Decision: Thursday, 11:45. ECB policymakers are expected to maintain current monetary policy, as the fragile eurozone economy shows some signs of recovery from the devastating Covid-19 pandemic. The main headaches for the ECB are the strong euro and the threat of deflation, so the rate statement could address these issues.
  6. German Final CPI: Friday, 6:00. Inflation dropped by 0.1% in August and this initial reading is expected to be confirmed. A reading in negative territory will reiterate that the eurozone could be facing a deflation problem due to weak economic activity.
  7. British GDP: Friday, 6:00. GDP has rebounded nicely since a disastrous plunge of 20.4% in April, which reflected the severe economic slowdown due to Covid-19. In June, GDP climbed 8.7% and the forecast for July is a solid gain of 6.6%.
  8. US Inflation: Friday, 12:30. Both the headline figure and the core figures posted gains of 0.6% in July. We now await the August data.
  • All times are GMT

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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