Last week turned out to be extremely volatile and turned out to be negative for the dollar, while mixed macro statistics coming from the US continue to rock the market.
As follows from a report released last Wednesday by the US Bureau of Labor Statistics, the consumer price index (CPI) came out in July with a value of 8.5% (on an annualized basis), which was lower than the forecast of 8.7% and the previous value of 9.1%. Core CPI (excluding food and energy prices) remained unchanged at 5.9%, which was also below the forecast of growth to 6.1%.
Weaker inflation data significantly dampened expectations for a larger Federal Reserve rate hike, putting pressure on the dollar.
Meanwhile, some economists warn that excessive pessimism about the dollar, which has fallen on a weaker CPI, may not be entirely appropriate, citing lingering geopolitical risks, given also the upcoming US midterm elections this fall.
One way or another, inflation in the US remains high, and Fed officials continue to talk about the need for a further super-tough cycle of monetary tightening.
Next week, the statistics departments of Canada and Great Britain will present their data on inflation, and the minutes from the July meeting of the Fed will also be published. In addition, market participants will pay attention to the release of important macro statistics for China, the US, the eurozone, Australia, and the results of the New Zealand Republic of Belarus meeting on monetary policy.
As always, a number of important macroeconomic data and a number of important news are expected to be published during the new trading week. It is also worth noting that changes may be made to the economic calendar during the coming week.
Europe celebrates the Day of the Assumption of the Virgin Mary. Banks will be closed on this occasion, in connection with which the volume of trading in the financial market will be reduced.
China. Retail sales
The Retail Sales Level Index is published monthly by China's National Bureau of Statistics and evaluates the total volume of retail sales and cash generated. It is the main indicator of consumer spending, which accounts for the majority of overall economic activity. It is also considered an indicator of consumer confidence and reflects the state of the retail sector in the short term.
The growth of the index is usually a positive factor for the CNY; a decrease in the indicator will negatively affect the CNY.
Previous index values (in annual terms) +3.1%, -6.7%, -11.1, -3.5, +6.7 (in February 2022) after +8% growth in the last months of 2019 year and falling by -20.5% in February 2020).
This is still weak data, which indicates the uneven pace of recovery in this sector of the Chinese economy after a strong fall in February-March 2020. If the data turns out to be weaker than the forecast, then the CNY could weaken sharply.
Outlook: In July 2022, retail sales in China grew by +5.0% (Y/Y).
The level of influence on the markets is medium to high.
Australia. Minutes of the Reserve Bank of Australia meetingThis document, which is a detailed account of the RBA's last meeting, provides insight into the economic conditions that influenced its decision on the level of interest rates.If the RBA is positive about the state of the labor market in the country, the GDP growth rate, and also shows a hawkish attitude towards the inflationary forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The soft rhetoric of statements by the central bank's leaders regarding, first of all, inflation will put pressure on the AUD."The Board will do everything necessary to ensure that, over time, inflation in Australia returns to the target level," said RBA Governor Philip Lowe. "This will require further interest rate hikes going forward."Economists now expect the RBA to raise its key rate to 2.6% by December 2022 and keep it at that level next year.If the published minutes contain unexpected or additional information regarding RBA monetary policy issues, the volatility in AUD quotes will increase.The level of influence on the markets is from low to high.
UK. UK labor market report
As a key indicator of labor market dynamics, this report, published monthly by the UK Office for National Statistics (ONS), includes data on average earnings for the last three months (with and without bonuses), as well as data on unemployment in the UK, also for the period last three months.
Growth in earnings is a positive factor for the GBP, indirectly indicating the growth of the consumer ability of the population and stimulating inflation. The low value of the indicator is a negative factor for the GBP.
Forecast: the average salary, including bonuses, increased over the last calculated 3 months (April-June), by +5.2% (after growth of +6.2%, +6.8%, +7.0%, + 5.4%, +4.8%, +4.3%, +4.2% in previous periods); without premiums - increased by +4.4% (after growth by +4.3%, +4.2%, +4.2%, +4.1%, +3.8%, +3.7%, +3.8% in previous periods).
If the data turns out to be better than the forecast and/or previous values, then the pound is likely to strengthen. Data worse than forecast/previous values will have a negative impact on the pound.It is also expected that for three months (from April to June) unemployment was at the level of 3.8% (against 3.8%, 3.8%, 3.7%, 3.8%, 3.9%, 4, 1%, 4.2% in previous periods).
Decrease in the unemployment rate is a positive factor for the pound, growth of unemployment is a negative factor.
Also, when drawing up a trading plan for this day, it should be borne in mind that at the time of release of data from the British labor market, an increase in volatility in pound quotes is expected.
The level of influence on the markets is medium to high.
Canada. Core consumer price index
Core Consumer Price Index (Core CPI) from the Bank of Canada reflects the dynamics of retail prices (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation and tobacco products) and is a key indicator of inflation. Consumer prices account for most of the overall inflation. Estimating the level of inflation is important for the management of the central bank in determining the parameters of the current monetary policy.
Given that the inflation target for the Bank of Canada is in the range of 1%-3%, the growth of the indicator (CPI and Core CPI) above this range is a harbinger of a rate increase and a positive factor for the CAD.
If the expected data turns out to be worse than the previous values, then this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar.
Previous values of the indicator (in annual terms): 6.2%, 6.1%, 5.7%, 5.5%, 4.8%, 4.3%, 4.0%, 3.6%. The data indicate that inflation is accelerating.
Forecast for July: +0.6% (+6.7% in annual terms).
The level of influence on the markets is high.
New Zealand. The decision of the Reserve Bank of New Zealand on the interest rate. RBNZ accompanying statement
The level of interest rates is the most important factor in assessing the value of a currency. Most other economic indicators are only looked at by investors to predict how rates will move in the future.
As a result of the meetings held in October and November, the RBNZ (for the first time in seven years) raised its key interest rate to 0.50%, and then to 0.75%. In February and April 2022, the interest rate was raised again to 1.5% to ease inflation and contain rapidly rising home prices, and then to 2.0% and 2.5%. The current RBNZ interest rate is 2.5%. Earlier, the RBNZ said that the economy no longer needs the current level of monetary stimulus.
It is expected that at this meeting the RBNZ may increase the interest rate again, as well as speak in favor of a further increase in the interest rate at the next meetings.
New Zealand. RBNZ press conference
During the press conference following the meeting, the factors that influenced the decision of the leaders of the RBNZ on the interest rate are considered, as well as comments are given on the economic conditions in which this decision was made.
Usually, the course of a press conference of the world's largest central banks, including the RBNZ (after a meeting on monetary policy issues), is accompanied by an increase in volatility in the markets, primarily in the quotes of the national currency.
The level of influence on the markets is high.
UK. Consumer price index
The consumer price index (CPI) reflects the dynamics of retail prices and is a key indicator of inflation. Consumer prices account for most of the overall inflation. Estimating the level of inflation is important for the management of the central bank in determining the parameters of the current monetary policy.
A reading lower than forecast/previous could trigger a weaker pound as low inflation forces the Bank of England to ease its monetary stance. And, on the contrary, rising inflation and its high level will put pressure on the BoE in the direction of tightening its monetary policy, which in normal economic conditions is assessed as a positive factor for the national currency.
Previous values of the indicator (in annual terms): 9.4%, 9.1%, 9%, 7%, 6.2%, 5.5%, 5.4%, 5.1%, 4.2%. The data indicate that inflation is accelerating.
Forecast for July: 0% (+9.8% in annual terms).
The level of influence on the markets is high.
Eurozone. GDP for the second quarter (updated estimate)
Eurostat will publish a report with updated data on eurozone GDP for the second quarter. There are three versions of the quarterly GDP, published with an interval of approximately 20 days - Preliminary, Updated, Final (final release). The pre-release is the earliest and therefore tends to have the most impact on the markets. This report reflects the overall economic performance of the eurozone countries and has a significant impact on the decision of the European Central Bank on monetary policy.
GDP growth means an improvement in economic conditions, which makes it possible (with a corresponding increase in inflation) to tighten monetary policy, which, in turn, usually has a positive effect on national currency quotes.
The publication of this report usually causes an increase in volatility in EUR quotes. It is likely that the report with updated data on eurozone GDP for the second quarter will be released with positive figures. Data worse than forecast/previous values will have a negative impact on EUR quotes.
Previous values: +0.6% (+5.4% Y/Y in Q1 2022), +0.3% (+4.6% Y/Y) in Q4, +2, 2% (+3.9% Y/Y) in Q3, +2.2% (+14.3% Y/Y) in Q2 and a fall of -0.3% (-1 .3% in annual terms) in the 1st quarter of 2021.
The preliminary estimate was: +0.7% (+4.0% in annual terms).
The level of influence on the markets is medium to high.
USA. Retail sales. Retail Control Group
The US Census Bureau will publish the next monthly report on retail sales in the US. This leading indicator of consumer spending reflects the total sales of retailers. Consumer spending accounts for most of the overall economic activity of the population, while domestic trade accounts for the largest part of GDP growth. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive effect on the USD.
Previous values: +1.0%, -0.3%, +0.7%, +1.4%, +0.8%, +4.9% (in January 2022).
Forecast for July: +0.1%.
The level of influence on the markets is high.
The Retail Reference Group indicator measures volume across the entire retail industry and is used to calculate price indices for most products. A high result strengthens the US dollar, and vice versa, a weak report weakens the dollar. Data worse than the values of the previous period and/or the forecast may negatively affect the dollar in the short term.
Previous values: +0.8%, 0%, +0.5%, +1.1%, -0.9%, +6.7% in January 2022.
The level of influence on the markets is high.
USA, Minutes from the July Fed Open Market Committee meeting ("FOMC Minutes")
A detailed account of the latest FOMC meeting, providing insight into the economic and financial conditions that influenced the decision of FOMC members. The publication of the minutes is extremely important for determining the course of the current policy of the Fed and the prospects for raising interest rates in the US. The volatility of trading in financial markets during the release of the minutes usually increases, since the text of the minutes often contains either changes or clarifying details regarding the results of the last FOMC meeting of the Fed.
The soft tone of the minutes will have a positive impact on stock indices and negatively on the US dollar. However, it is worth noting that following the results of the July meeting, the Fed leaders also decided to raise the interest rate immediately by 0.75%, to the level of 2.50%.
The harsh rhetoric of the Fed's leaders regarding the prospects for monetary policy will push the dollar to further growth.
The level of influence on the markets is high.
Australia. Australia Employment ReportThis Australian Bureau of Statistics report is an extremely important indicator of the state of the Australian labor market. Reflecting the monthly change in the number of Australians employed, it is also an important leading indicator of consumer spending, which accounts for the majority of overall economic activity.The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high reading is positive for the AUD, while a low reading is negative.Previous values of the indicator: 88,400 in June, +60,600 in May, +4,000 in April, +17,900 in March, +77,400 in February, +12,900 in January 2022.Forecast: in July, the number of employed citizens increased by +25,000.The unemployment rate is an indicator that assesses the ratio of the share of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the AUD.Previous values of the indicator: 3.5% in June, 3.9% in May, April and March, 4.0% in February, 4.2% in January.If the values of the indicators from this report turn out to be worse than the forecast, then the Australian dollar may fall sharply in the short term. Better-than-expected data will have a positive impact on the AUD.Forecast: in July, the unemployment rate remained at around 3.5%.The level of influence on the markets is medium to high.
USA. Unemployment claims
The US Department of Labor will publish a weekly report on the state of the US labor market with data on the number of primary and secondary claims for unemployment benefits. The state of the labor market (together with data on GDP and inflation) is a key indicator for the Fed in determining the parameters of its monetary policy.
The result is higher than expected and the growth of the indicator indicates the weakness of the labor market, which has a negative impact on the US dollar. The drop in the indicator and its low value is a sign of the recovery of the labor market and may have a short-term positive impact on the USD.
It is expected that the number of initial and repeated claims for unemployment benefits will remain at the lows corresponding to the lows of the period before the coronavirus pandemic, and this is also a positive factor for the dollar, indicating the stability of the US labor market.
Previous (weekly) figures for initial jobless claims: 262,000, 248,000, 254,000, 261,000, 244,000, 235,000, 231,000, 232,000, 202,000, 211,000
Previous (Weekly) Values for New Jobless Claims Data:
1,428,000, 1,420,000, 1,368,000, 1,384,000, 1,333,000, 1,372,000, 1,324,000, 1,331,000, 1,309,000, 1,309,000
The level of influence on the markets is medium to high.
UK. Retail sales level indexThe Retail Sales Index is the main measure of consumer spending, which accounts for the majority of overall economic activity, and is published monthly by the UK Office of National Statistics (ONS). The index is considered an indicator of consumer confidence, and also reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the national currency; a decrease in the indicator will negatively affect the GBP. Previous values of the indicator (in annual terms): -5.8%, -4.7%, -5.7%, +1.3%, +7.2%, +9.4% (in January 2022) .Forecast for July: -3.3%.The level of influence on the markets is medium
Canada. Retail sales level index
The Retail Sales Index is the main measure of consumer spending, which accounts for the majority of overall economic activity, and is published monthly by Statistics Canada. The index is considered an indicator of consumer confidence, and also reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. Previous values of the indicator: 2.2%, 0.7%, 0.2%, 3.3% (in January 2022).
The level of influence on the markets is medium to high.
