Overview of Major market moving events for 45th week of 2015

Author Anil Panchal Category Fundamental Analysis 03 Nov 2015 Updated at 10:33 CET
Renewed concerns for the December rate hike, triggered by the last week’s FOMC statement, failed to propel the US Dollar Index (I.USDX) towards another positive weekly closing as downbeat GDP and Personal Spending details faded speculations that the US economy is stronger enough to withstand the first interest rate hike since 2006. The European currency, Euro, ended up gaining a bit against majority of its counterparts in last week as comments from the ECB Chief, during his appearance on Italy’s Il Sole 24 Ore News, mentioned that the QE extension during December meeting isn’t certain. Moving on, the JPY strengthened across the board, even with the downgraded inflation forecast by the Bank of Japan (BoJ), as the central bank refrained from altering its monetary policy and the Governor repeated his hawkish tone for the economic review while aftershocks of Chinese rate cuts, coupled with mixed economic numbers, caused unclear trading results for the commodity currencies, namely AUD, NZD and CAD.

During the early weekdays, Chinese Manufacturing indices kept languishing in the contraction region; though, upbeat Manufacturing PMIs from UK and US conquered industrial pessimism while the decision to hold its six month old cash-rate intact by the Reserve Bank of Australia (RBA) contributed in giving positive start to the crucial week.

The current week contains majority of important forex announcements that can fuel considerable volatility into the world’s largest market. To mention them, job details from US, Canada and New-Zealand, Quarterly Inflation Report by the Bank of England (BoE), Testimony by the Fed Chair may generate the news headlines while slew of headline PMIs and industrial production from UK, coupled with Trade Balance numbers from Australia, US and Canada are additional events that can provide busy week ahead. Let’s start examining them in detail.

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US Job Details Awaited

Considering the mixed signals flashed via recent downbeat economics and hawkish tone of the last week’s FOMC meeting, market players eagerly await the October month US Labor Market Numbers, mainly Unemployment Rate and Non-farm Payrolls (NFP), scheduled for Friday release, in order to determine near-term USD moves. Moreover, the ADP Non-Farm Employment Change, up for Wednesday release, is an early signal to determine government job details and can help better place the USD trades in-advance.

Barring the last two months, the NFP has been above 200K mark for majority of 2013, 2014 and 2015; though, September reading plunged to the six months’ lows while the unemployment rate stood still near the lowest level in seven years of 5.1%. Forecasts concerning this week’s US job details announcements signal that ADP number may dip a bit to 183K from 200K prior while the NFP can mark improvement with 179K from its 142K prior month’s reading. Further, the Unemployment Rate isn’t likely to change from 5.1% mark.

Testimony on bank regulation before the House Financial Services Committee by Fed Chair, scheduled for Wednesday, is another important US event to consider. Although the event isn’t concentrated on indicating Fed’s further policy moves, question-answer session by the committee can require the central banker to hint for future monetary policy of the Federal Reserve and can portray the near-term USD moves.

Other than these top-notch events, US Factory Orders, Trade Balance and Jobless Claims are rest of the US data points up for release during the current week. Even if the Thursday’s weekly Jobless Claims is likely to test the five week high of 263K versus 260K prior, monthly reading of Factory Orders, to be announced on Tuesday, can erode some of its prior declines of -1.7% with -0.8% and the Trade Balance details, scheduled for Wednesday release, favors a decline in deficit to -42.7B from its -48.3B previous reading.

Off-late the Federal Reserve have again started flashing hawkish signals and improvements in US job details, either matching or surpassing the forecasts, coupled with another dose of positive talk by the Fed Chair, can strengthen speculations relating to the December rate hike, favoring fresh USD up-move.
Lack of Major European Details Can Be Compensated By The UK Announcements

Although German Factory Orders is the only European reading scheduled during the week to direct EUR moves, front-line PMI readings from UK and the BoE’s monetary policy meeting, together with Quarterly Inflation Report (QIR) announcement, may supersede the lack of economic details/events.
German gauge of factory purchases, Factory Orders, scheduled for Thursday, bears the consensus to reverse its prior two month’s decline with 1.1% gain and can add strength into the Euro if an actual figure either matches or surpasses the consensus.

Following Monday’s UK Manufacturing PMI, which rallied to the highest level in more than a year, and the Construction PMI, announced on Tuesday, printing 58.8 mark versus its seven month highs 59.9 prior level, Services PMI and Manufacturing Production, scheduled for Wednesday and Friday respectively, are the UK left ones that can help foresee near-term GBP moves. While the Manufacturing Production is likely to weaken to 0.4% from 0.5 prior, the Services PMI, core to the UK economy, bears the consensus of improving to 54.6 versus its 53.3 prior and can help improve the GBP strength.
Thursday becomes an important day for the Forex market as the Bank of England (BoE) is scheduled to fuel the volatility with its monetary policy meeting and release the minutes for the same, alike recent MPC meetings, together with publishing the important Quarterly Inflation Report (QIR), followed by a press conference from BoE Governor.

Irrespective of the no monetary policy change expectations from the BoE, coupled with only one likely MPC vote, from total nine, favoring the change in Official Bank Rate, details of the QIR and press conference by the Governor, wherein he is scheduled to present final economic forecasts for 2015, become pivotal to foresee the near-term GBP moves. During its latest release of QIR, the UK central bank raised its forecast for 2015 GDP to 2.8% from 2.5% projected in May while near-term inflation projection was cut down with the reason given as plunge in commodity prices.

Even if the recent declines in UK Inflation favors another downward revision to the central bank’s price forecasts, the down-move was well expected and improvement in job details can back the BoE in flashing optimistic projections, helping the GBP rise. Moreover, a hawkish tone of the Governor, favoring a rate hike in 2016 can provide additional fuel to the Pound up-move.
Details From Canada and New-Zealand

In addition to the headline events, labor market numbers from New-Zealand and Canada, scheduled for Wednesday and Friday respectively, coupled with the Canadian Trade Balance, up for Wednesday release, are some other details that can help determine near-term moves of the CAD and NZD.

The Canadian Trade Balance kept printing deficits and tested the lowest levels in three months recently and the Unemployment rate also marked the highest level in more than a year during previous month release; however, the Employment Change rallied to the four month’s high of 12.1K during last month. Higher Unemployment Rate and larger trade deficit can continue limiting chances of CAD strength while improvement in Employment Change, together with the stop in Crude price declines, may become a reason for the CAD to move northwards.

Moving to the New-Zealand job details, namely Employment Change and Unemployment Rate, the Unemployment rate is expected to test the highest level since May 2014, to 6.0% from 5.9% previous mark while the quarterly Employment Change indicates positive sing with a forecast of 0.4% growth versus 0.3% prior. Recently declining dairy prices, New-Zealand’s main source of income, coupled with the Chinese pessimism, can have larger negative impact on the New-Zealand Dollar (NZD), if the labor market number flash downbeat readings.
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