Forex Weekly Outlook Oct 31- Nov 4

Forex Weekly Outlook Oct 31- Nov 4

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The US dollar struggled to maintain its momentum as political issues took over and despite good growth figures. Rate decisions in Australia, Japan, the US and the UK, GDP data from Canada, Employment data from New Zealand Canada and the US Non-Farm Payrolls form a very busy week. These are the major events on our calendar. Join us as we explore the highlights of this week.

U.S. initial growth figures for the third quarter showed the best increase in two years, posting a 2.9% expansion rate. Growth was sluggish in the first half of the year, averaging just above 1%, indicating the US economy is back on track. Solid growth numbers will enable the Federal Reserve to raise interest rates at the end of this year. The dollar could hold on to the gains as a new email scandal embattled Hillary Clinton. Elsewhere, worries of a hard Brexit beat positive growth figures in the UK and the euro managed to recover also thanks to an upbeat German survey. Let’s start,

  1. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia kept the official cash rate at 1.5% in its October meeting despite Aussie volatility and sluggish mining transition. The decision to leave the rate unchanged was in line with market forecast. However, analysts expect an additional rate cut this year. Policy officials were more optimistic regarding the prospects of GDP growth expecting a boost in employment during the next 12 months. Recent inflation data has been solid.
  2. Japan rate decision: Tuesday. Japan’s central bank kept maintained rates at its September meeting, but introduced fresh changes to its policy approach, in an attempt to boost prices and boat economic growth. The Bank of Japan said it would focus on yield-curve control and would buy 10-year Japan government bonds so that the yield would hover around zero percent while restraining short-term rates. Furthermore the central Bank also abandoned its monetary base figures saying it will expand the monetary base until the inflation target is met.
  3. Canadian GDP: Tuesday, 12:30. The Canadian economy expanded more than expected in July, growing by 0.5% amid a rebound in oil and gas output. Economists expected a weaker growth rate of 0.3% for the month. Activity in the mining, oil and gas extraction rose 3.9% from June, including a 19% increase in non-conventional oil extraction and the manufacturing sector also gained 0.3%. The overall picture showed a broad-based expansion of economic activity. Economists expect a 0.2% growth in August.
  4. US ISM Manufacturing PMI: Tuesday, 14:00. The US manufacturing sector rebounded in September, crossing the 50 point line to 51.5 from 49.4 in August, indicating expansion. Analysts expected a more modest rise to 50.4. The employment index remained in contraction despite the improvement from August. Meanwhile the new orders and production also gained momentum with their gauges rising above the critical 50 level. Analysts expect the growth trend to continue suggesting that the August drops were likely a blip. Manufacturing activity is expected to reach 51.8.
  5. NZ Employment data: Tuesday, 21:45. New Zealand’s labor market continued to strengthen in the second quarter rising 2.4% to reach 2.5 million people, following a 1.2% rise in the first quarter. The reading reflects a stronger employment market. The labor force continued to increase amid strong immigration, as well as a positive trend in participation by women and older workers. Meanwhile the unemployment rate has declined to 5.1% from a revised 5.2% in the first quarter. Economists expect the unemployment rate to average 5.4% in 2016, which is down 0.2 percentage points from last month’s forecast, while the unemployment rate for 2017 is expected to average 5.3%. NZ is expected to increase its labor force by 0.6% in the second quarter and maintain its unemployment at 5.1%.
  6. US ADP Non-Farm Employment Change: Wednesday, 12:15. U.S. private sector added 154,000 jobs in September, missing estimates for a 166,000 gain. In the prior month the reading was revised down to 175,000 from the 177,000 previously reported. The unemployment rate was expected to remain at 4.9%. Analysts expect ADP report to show a 166,000 jobs gain in October.
  7. US Crude Oil Inventories: Wednesday, 14:30. US Crude stocks declined by 600,000 barrels last week, following a 4.9 million barrel rise in the previous week. Analysts expected a rise of 700,000 for the week. The rise in crude prices following the “agreement” among OPEC members to limit production has ended. Crude prices edged up at $51.60 just over two weeks but sunk again struggled to maintain the $50 a barrel level ever since.
  8. FOMC rate decision: Wednesday, 18:00.  Federal Reserve policymakers kept rates unchanged in September despite expressing confidence in US economic growth. The members lowered their expectations for rate hikes in the coming years but said it is likely to be announced before the end of 2016. The Fed said it awaits further evidence of continued progress toward its objectives. The committee reduced its expectations for economic growth and inflation this year despite the solid state to the labor market. Global developments continued to trouble the Fed members, particularly the Brexit vote and a slowdown in China.
  9. UK Rate decision: Thursday, 12:00. The Bank of England left its interest rate at 0.25% leaving the door open for another cut in the coming months. The central bank cut its rate from 0.5% to 0.25% to ensure the stability of the UK’s banking system in the aftermath of the June Brexit referendum vote. However, policy officials said a further cut is possible in the following months. Economic forecasts in November remained unchanged from August. The Bank noted that many economic indicators have suggested that the UK economy has overcome the post-referendum aftermaths, therefore the Bank is not as worried about the short-term state of the economy.
  10. US Unemployment Claims: Thursday, 12:30. The number of Americans who filed new claims for unemployment aid fell by 3,000 claims to 258,000. Economists expected a reading of 261,000. The four-week moving average was 253,000, up 1,000 from the previous week. Continuing jobless claims fell to 2.039 million from 2.054 million in the preceding week.
  11. US ISM Non-Manufacturing PMI: Thursday, 14:00. Service-sector activity edged up to the highest level in nearly a year in September, rising to 57.1 from 51.4 in August, a sign of steady growth for a major sector of the economy. Economists expected a September reading of 53.1. The better than expected figures may help reduce concerns the economy is slowing from last year’s moderate growth. Service-sector activity is expected to remain in expansion reaching 56.2.

Canadian employment data: Friday, 12:30. The Canadian economy added 67,000 jobs in September exceeding expectations for meager employment growth. However the majority of gains were related to part-time work and self-employment. The unemployment rate remained steady at 7%. This was the biggest employment gain in four years and marked the second consecutive month of robust job creation. Part-time employment increased by 44,000 positions while full-time work rose by 23,000 jobs. Self-employment made up of both part-time and full-time employment – soared by 50,000 new jobs. Economists expect a contraction of 10,000 jobs in October and the unemployment rate at 7%.

US Non-Farm Payrolls: Friday, 12:30. US job creation increased less than expected in September as Non farm payrolls increased 156,000 and the unemployment rate inched up to 5%. Economists expected a 171,000 jobs gain and the jobless rate of 4.9%. However economists say the reading is within the broad range of expectations showing a slow and steady growth. Average hourly wages increased by 6 cents to an annualized rate of 2.6%. The average work week also inched up one-tenth to 34.4 hours. The report comes at a critical time for the Federal Reserve as the central bank is looking more confidently toward an interest-rate increase. US employment market is expected to gain 175,000 and predict the unemployment rate would decline to 4.9%.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.

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