Major market moving events for 36th week of 2015

Author Haresh Menghani Category Fundamental Analysis 31 Aug 2015 Updated at 01:20 CET

Last week the Forex market witnessed extreme volatility on the back of worries over China led global economic slowdown. Following its initial sharp fall on Monday last week, the US Dollar managed to bounce back sharply as positive US economic releases continues supporting optimistic views of a strong US economic recovery and thus leaving the door open for a September rate-hike by the Federal Reserve. Last week's positive US economic data included an unexpected strong rebound in durable goods orders and a sharp upward revision of the second quarter GDP figure. The US Dollar, however, remained weak against JPY, which is perceived as a safe-haven currency during turbulent times. Nevertheless, the overall US Dollar Index (I.USDX) recorded its first weekly gain in the previous three but is still headed for a monthly loss.

 

With the beginning of a new month, investors gear up for some top-tier economic releases including one of the most keenly watched economic indicator from the US, non-farm payrolls data (a.ka. NFP). This week’s economic calendar has all the ingredients to produce yet another week of some meaningful volatility in the Forex market.

 

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This week's center of attraction would be the release of US labor market reports for the month of August, scheduled on Friday. US jobs report has traditionally been known for generating substantial volatility and this week's data would be no exception. With an addition of 215,000 new jobs and unemployment rate holding steady at 5.3%, last month's data marginally fell short of expectations but still reflected steady pace of improvement in the US labor market conditions. The momentum is expected to continue in August with consensus estimating the economy to have added 220,000 new jobs during the month, while the unemployment rate dropping further to 5.2%.

 

Ahead of the official employment report, ADP report, which shows the number of private-sector jobs addition and also provides an early estimate for the government's report, is scheduled for release on Wednesday. The ADP report is expected to show an addition of 204,000 new private-sector jobs in August as compared to 185,000 jobs in July.
 

In the run-up to the NFP data, this week's busy US economic calendar begin with the release of Chicago PMI data for the month of August, which is scheduled for release on Monday. Meanwhile, prospects of continuing US economic growth trajectory in the third-quarter of 2015 is likely to be supported by this week's ISM manufacturing and non-manufacturing PMI data, which are scheduled for release on Tuesday and Thursday respectively. The ISM manufacturing and non-manufacturing PMI figures are expected to continue reflecting expanding business activity in August but at a slightly slower pace. Manufacturing index is expected to come-in at 52.6 versus 52.7 in July and non-manufacturing index is expected to print 58.3 as compared to 60.3 recorded in the previous month. Traders will also have a look at the US trade balance data for the month of July, also scheduled for release on Thursday, which is expected to reach $43.2 Billion from the previous reading of $43.8 Billion.

 

Even as the timing of interest-rate hike by the US Fed remains uncertain, last week’s upward revision of second-quarter GDP coupled with this week’s yet another stronger jobs report would now be enough to resurface expectations of the Fed announcing a rate-hike during its September meeting. This would eventually lead to an ultra-strong dollar in the near-term and also reaffirm medium to long-term established bullish trend for the US Dollar.

 

Also preceding the NFP data, monetary policy decisions from Australian (RBA), European (ECB) central banks are scheduled for announcement on Tuesday and Thursday respectively. Although RBA is not expected to make a move on interest rates, but given the economic slowdown in China, RBA might be forced to possibly hint towards its readiness for a future rate cut in order to stimulate economic growth. Moreover, this week's Australian GDP data for the second-quarter of 2015, scheduled for release on Wednesday, would also have a lasting effect on the Australian Dollar (AUD). Market participants forecast the data to show economy registering a growth of 0.4%, down from 0.9% growth rate recorded in the previous quarter. Other economic data that could impact AUD include the monthly retail sales and trade balance data for the month of July and are scheduled for release on Thursday.

 

Also watch out for economic data from China, Australia's largest trading partner that usually bears a material impact on the Australian Dollar (AUD). Important Chinese data, scheduled for release on Tuesday, includes official manufacturing and non-manufacturing PMI, accompanied with the release of Caixin final manufacturing and services PMI for the month of August. Chinese data pertaining to manufacturing activity, always has a lasting effect on AUD. Hence, reading below 50 (as is expected), would reflect contraction in manufacturing activity and thus might continue to exert pressure on the already weak Australian Dollar.

 

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Meanwhile, the latest reading of the Euro-zone inflation, released on Monday, held steady at 0.2%. However, considering the recent slide in commodity prices, downside risks to Euro-zone inflation has increased. Low inflation expectations now seems to fuel speculations of a need for ECB to announce additional stimulus to support Euro-zone's fragile economic recovery. Hence, comments from ECB President Mario Draghi during ECB press conference, which will be followed by the monetary policy decision announcement on Thursday, will be closely scrutinized. Dovish tone accompanied with falling inflation expectations would further fuel speculations of announcement of a fresh stimulus by ECB, which might now trigger resumption of depreciating move for the common currency, Euro.

 

Key data to watch from this week's UK economic calendar UK includes important PMI figures for the month of August, i.e. Manufacturing PMI, Construction PMI and Services PMI. Tuesday’s release features manufacturing PMI, while construction PMI is scheduled for release on Wednesday and release of services PMI is scheduled on Thursday.

 

The Canadian economic calendar too, will be relatively active during the week with scheduled release of monthly GDP, trade balance and employment data. Last month the monthly Canadian GDP posted yet another unimpressive reading of -0.2%, making it third consecutive month of contraction in the overall economic activity. For the month of June, the economy is expected to have rebounded with consensus estimating GDP to have grown by 0.2%. The monthly Canadian GDP data is scheduled for release on Tuesday. Also watch-out for Canadian trade balance data for the month of July and monthly jobs report, scheduled for release on Thursday and Friday.

 

 

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