Economic calendar for the week 27.07.2020 – 02.08.2020
Overview of the main events of the Forex economic calendar for the next trading week 27.07.2020 – 02.08.2020
Trading on key Forex news: we are expecting the publication of important macro statistics from the US, Australia, Germany, China, the Eurozone, as well as the results of the Fed meeting and its decision on the interest rate.
The dollar continued to decline last week. The DXY dollar index updated October 2018 lows by falling below 94.47.
American and European stock indices also closed the week in negative territory. Investors focused on the worsening coronavirus situation in the United States, lower demand and continued high unemployment rates with millions of unemployed Americans. The next increase in the number of claims for unemployment benefits provoked new fears about the possibility of a slowdown in the economic recovery due to an increase in cases of coronavirus infection.
Economists are also looking at data pointing to a downturn in the mobility of consumers who prefer to stay at home to protect themselves from the coronavirus. In their opinion, this presents “obvious downside risks for economic growth and for the labor market.”
Against the backdrop of pessimistic sentiments of investors, gold quotes climbed last Friday above the mark of 1900.00 dollars per ounce. The growth in gold prices is facilitated by both the soft policy of world central banks and the uncertainty about the strength of the upward trend in stock indices amid the ongoing trade conflict between the United States and China, as well as the further spread of the coronavirus.
At the same time, the euro, after receiving support from the decision of the leaders of the European Union to approve a package of expenses for the recovery of the bloc’s economy in the amount of 1.8 trillion euros, strengthened significantly last week, against the dollar as well.
The regional authorities are providing strong fiscal support to the European economy, which is likely to have a positive effect on the euro. The rise in the supply of highly rated euro-denominated government and intergovernmental bonds will strengthen the euro’s international role, making it an alternative to the dollar as a defensive asset, economists say.
Next week will not be full of important macro statistics. Investors will focus on the data on the GDP of the Eurozone and the US for the 2nd quarter and the Fed meeting, which will end next Wednesday with the publication of the decision on the interest rate. Investors will also pay attention to the release of several important macro data for the US, Australia, Germany, and China.
Traders should pay attention to the following significant macroeconomic data expected next week:
* during the coming week new events may be added to the calendar and scheduled events may be canceled
** GMT time
Monday, July 27
12:30 USD Durable goods orders. Capital goods orders (ex defense and aviation)
This indicator reflects the value of orders received by manufacturers of durable goods and capital goods (capital goods are durable commodities used to produce durable goods and services), involving large investments. Goods manufactured in the defense and aviation sectors of the US economy are not included in this indicator. A strong result strengthens the USD. Previous values of the indicator “orders for durable goods”: +15.7% in May, -18.3% in April, -16.7% (in March), +2.0% (in February), -0.2% (in January).
Previous values of the indicator “orders for capital goods excluding defense and aviation”: +1.6% in May, -6.6% in April, -1.3% (in March), -0.6% (in February) , +0.9% (in January).
In theory, the relative growth of the indicator has a positive effect on the dollar. However, the market’s reaction to its negative value may be negative for the dollar in the short term. Data worse than the previous value will also have a negative impact on dollar quotes. Forecast for June: +6.5% (orders for durable goods), +1.5% (orders for capital goods excluding defense and aviation).
After falling sharply in March and April, these are still weak values reflecting the still uncertain economic recovery after falling earlier this year.
Tuesday, July 28
No important macro statistics planned to be released.
Wednesday, July 29
01:30 AUD RBA core inflation index using the trimmed mean method (for the 2nd quarter). Consumer Price Index (Q2)
This indicator is published by the RBA and the Australian Bureau of Statistics. It reflects the dynamics of retail prices of goods and services included in the consumer basket. The simple trimmed mean method takes into account the weighted average kernel, the central 70% of the index components. Previous index values: +0.5% (+1.8% in annual terms) in the 1st quarter of 2020, +0.4% (+1.6% in annual terms) in the 4th, 3rd and in the 2nd quarters of 2019. According to the forecast, it is expected that the value of the indicator for the 2nd quarter of 2020 will be +0.1% (+1.4% in annual terms). If the value of the indicator coincides with the forecast or turns out to be worse than it, it is likely to negatively affect the AUD. The data indicate low inflationary pressures in the country. The growth of the indicator should have a positive effect on the AUD in the short term.
The Consumer Price Inflation Index (CPI) published by the RBA and the Australian Bureau of Statistics measures the dynamics of retail prices for goods and services in Australia. CPI is the most significant indicator of inflation and changes in consumer preferences. A high reading is positive for the AUD, while a low reading is negative. Previous values of the indicator: +0.3% (+2.2% in annual terms) in the 1st quarter of 2020, +0.7% (+1.8% in annual terms) in the 4th quarter, +0.5% (+1.7% in annual terms) in Q3 2019. According to the forecast, it is expected that the value of the indicator for the 2nd quarter of 2020 will be 2.0% (-0.4% in annual terms). The relative decline in the indicator is likely to negatively affect the AUD in the short term. If the value of the indicator turns out to be worse than the forecast, it will even more negatively affect the AUD.
18:00 USD The Fed’s decision on the interest rate
Following two meetings in March, the Fed sharply cut interest rates (to 0.25% from 1.75% in February), and also announced the allocation of $700 billion for the purchase of US government bonds and mortgage-backed securities. Subsequently, the Fed has repeatedly announced additional measures to support the US economy and inject cheap liquidity into the financial system. Usually, with the easing of monetary policy, the national currency becomes cheaper and its quotations go down.
In the last 3 months, the dollar has been declining as investors are withdrawing funds from defensive assets, buying riskier and more profitable assets of the stock market, which continues to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset is also declining.
The rate is widely expected to remain at 0.25% at this meeting. At the end of May, US Federal Reserve Chairman Jerome Powell said that he was “satisfied with the current situation and the path we (at the Fed) are now heading.” “We are not close to any of our limits,” – said Powell, making it clear that the Fed intends to continue to support the economy. Other Fed leaders have also repeatedly stated in recent days that they are in favor of continuing the policy of supporting the American economy.
Nevertheless, during the period when the rate decision is published, volatility may sharply increase throughout the financial market, primarily in the US stock market and in dollar quotes, if the rate decision differs from the forecast.
18:30 USD FOMC Press Conference
The press conference of the US Federal Open Market Committee lasts about an hour. In the first part, the ruling is read, followed by a series of questions and answers that can increase market volatility.
Powell’s comments may affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthening the US dollar, while a more cautious position is seen as negative for the USD. Any hints by Powell about the possibility of a change in the current monetary policy will cause an increase in volatility in the dollar quotes and on the American stock market.
Thursday, July 30
06:00 EUR Germany’s GDP for the 2nd quarter (preliminary release)
GDP is considered the most important indicator of the overall health of the economy. The growing trend in the GDP indicator is considered positive for the national currency. The German economy is the locomotive of the entire European economy. A high value of GDP is considered a positive factor for the EUR, while a low one is considered negative.
The growth of the European and German economies slowed sharply in 2019, and in 2020 the European economy has already entered a recession in many ways. Domestic political risks have been added to the risk of no-deal Brexit and the coronavirus pandemic.
If the GDP data turns out to be weaker than the forecast, it will put even more downward pressure on the euro. Better-than-expected data may strengthen the euro in the short term.
Forecast: German GDP contracted by -9.0% in the second quarter (after falling by -2.2% in the first quarter).
12:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany (preliminary release)
This index is published by the EU Statistics Office and is calculated on the basis of a statistical method agreed between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative one weakens it.
In May, the HICP index (in annual terms) increased by +0.5%, in June by +0.8%. Preliminary forecast for July: +0.6%. The euro is unlikely to react strongly positively to the publication of this indicator. If the data turn out to be better than the forecast, then the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data show that inflationary pressures are still low in Germany. The data is worse than the forecast and the previous value will negatively affect the euro.
12:30 USD Initial jobless claims in the United States in the last week. US Annual GDP for Q2 (preliminary estimate)
The situation on the country’s labor market is still tense. Back in February, the indicator of primary claims for unemployment benefits was within its average values of 193-252 thousand. However, then the situation began to deteriorate sharply. During the week of March 22-28, 6.9 million claims were filed, then 6.606 million claims, shocking observers and market participants. The similar indicator published last Thursday (for the week of July 12-17) came out with a value of 1.416 million new claims.
Published in early May, the US Department of Labor data showed an increase in unemployment in the country to the level of 14.7%. In June, the US unemployment rate was 11.1%. Economists attribute this to the coronavirus, which has hit the US economy. Many American companies have announced layoffs, and the authorities have ordered non-vital companies to close their offices and stores due to the coronavirus epidemic. The current weekly filing growth rate is well above the previous record high of 695,000 reached in October 1982. Then the number of initial claims filed in four weeks was 2.7 million.
This indicator (the number of new claims for unemployment benefits) reflects the state of the labor market. The rise in value negatively affects consumption levels and economic growth. Under normal circumstances, a high score weakens the US dollar and a low score strengthens it. However, in the current environment (the coronavirus pandemic and a sharp economic slowdown), the reaction of market participants to the publication of this report of the US Department of Labor can be completely unpredictable.
Annual US GDP for the 2nd quarter (preliminary estimate). GDP data is one of the key indicators (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. Strong result strengthens US dollar; weak GDP report negatively affects the US dollar. In the previous 1st quarter, GDP declined by -5.0% after growing by 2.1% in the 3rd and 4th quarters of 2019. The preliminary forecast for the 1st quarter of 2020 was -4.1%, but actually turned out to be at the level of -5.0%. The data already takes into account the impact of the coronavirus on the American economy. However, experts predict an even stronger slowdown in the 2nd quarter (by -6.2%). The publication of the data is likely to cause a short-term decline in the dollar. The data weaker than the forecast may even more negatively affect the dollar quotes.
Friday, July 31
01:00 CNY China Federation of Logistics & Purchasing (CFLP) Manufacturing PMI
This indicator is an important indicator of the state of the Chinese economy as a whole. A result above 50 is seen as positive and strengthens the CNY, one below 50 as negative for the yuan. Forecast: 48.6 in July (against 50.9 in June).
A relative decline in the index and 50 readings could negatively impact the CNY. Data below 50 indicates a slowdown in activity, which negatively affects the quotes of the national currency.
In the opposite case, and if the indicator grows above the forecast and the value of 50, the yuan will receive support and is likely to strengthen.
01:00 CNY China Federation of Logistics & Purchasing (CFLP) Services PMI
This indicator assesses the state of the service sector in the Chinese economy. A result above 50 is considered positive and strengthens the yuan. Forecast: 51.2 in July (against 54.4 in June).
Despite the relative decline, the indicator is still above 50, which is likely to have a positive impact on the yuan quotes.
06:00 EUR Retail sales
Retail sales are the main consumer spending indicator in Germany showing changes in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast: +11.0% (+ 1.4% in annual terms) against +13.9% and +3.8% (in annual terms) in May.
09:00 EUR Consumer Price Index. Core Consumer Price Index (preliminary release). Eurozone GDP for Q2 (preliminary release)
Consumer Price Index (CPI) is published by Eurostat and measures the price change of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changing purchasing habits. A positive result strengthens the EUR, a negative one weakens it. In January, the CPI index increased by 1.4% (in annual terms), in February – by +1.2%, in March – by +0.7%, in April – by +0.3%, in May – by +0.1%, and in June – by +0.3%, which indicates low inflationary pressure and even a slowdown in inflation. Forecast for July: +0.4% (annualized). If the data turn out to be worse than the forecast, the euro may fall sharply in the short term. The data better than the forecast and / or the previous value may strengthen the euro in the short-term, despite the low value (the target level of the ECB’s consumer inflation is just below 2.0%).
Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy are excluded from this indicator to provide a more accurate estimate. A high result strengthens the EUR, while a low result weakens it. In January, Core CPI increased by 1.1% (in annual terms), in February – by +1.2%, in March – by +1.0%, in April and May – by +0.9%, and in June – by +0.8%. If the data for July turn out to be worse than the previous value or forecast, then this may negatively affect the euro. If the data turn out to be better than the forecast or the previous value, the euro is likely to respond with an increase, but only in the short term. Inflation in the Eurozone remains low, and this is a negative factor for the euro. Forecast for July: +0.9%.
GDP is considered an indicator of the overall health of the Eurozone economy. The growing trend in the GDP indicator is considered positive for the EUR; a low result weakens the EUR.
Recently, macro data from the Eurozone has been indicating a slowdown in the growth of the European economy. However, the decision made by the EU leaders last week to provide additional support to the economy (a package of spending on the economic recovery of the bloc of 1.8 trillion euros was approved) will help stabilize the economy of the Eurozone, which as a result of quarantine restrictions, restraint in spending by companies and consumers, as well as the export, is on the verge of the deepest economic downturn since World War II.
The euro reacted positively to this decision. Nevertheless, according to the forecast of economists, the GDP of the Eurozone is expected to decrease in the 2nd quarter by -4.7% (-4.3% in annual terms) after growth by +0.1% (+1.0% in annual terms) in Q4 2019 and a decline of -3.6% (-3.1% YoY) in Q1 2020.
Courtesy of LiteForex
If the data turns out to be weaker than the forecast, then the euro may decline. Better-than-expected data may strengthen the euro in the short term.
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