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Daily Briefing, July 10 – UK GDP, BOC Policy & Fed Testimony in theLimelight

What’s up, traders.

Here comes a big day: the economic docket is fully loaded with high impact economic catalysts from the UK, US & Canadian economies. It’s going to be a fun day for forex traders.

Overall, the US dollar surged to near a three-week high versus a basket of major currencies on Wednesday as traders continued to unwind odds of deep US interest rate cuts. Having said that, the market may continue to trade with a bullish dollar sentiment ahead of Federal Reserve Chair Powell’s testimony later in the day.

Watchlist – Key Economic Figures

GBP – GDP q/q – 8:30 GMT

The GDP data is forecast to surge by 0.3% vs. a drop of -0.4% last month, signaling that the British economy grew faster in the month of June 2019.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.0% in June 2019, down from 2.1% in May 2019. Considering the downbeat inflationary pressure, we can expect a drop in GDP figures. Additionally, the British Pound remains under heavy selling pressure over Brexit uncertainties.

GBP – Manufacturing Production m/m
Besides the GDP, the UK.economy is due to release the manufacturing production at the same time. The manufacturing production is also expected to surge by 2.2% vs. -3.9% previously. Manufacturing makes up around 80% of total Industrial Production, therefore it tends to dominate the market impact.

CAD – BOC Monetary Policy – 14:00 GMT
The BOC has been one of the few central banks amongst liberal economies (apart from US Federal Reserve) that has been able to raise interest rates despite the crises and trade war. The Bank of Canada has increased rates four times since 2017, but considering the slow global economic growth, the US-China trade war, and weaker crude oil prices, the BOC is likely to keep the interest rates as it is.

Traders, the initial reaction can be bullish for the Loonie, however the trend can be short-lived. So, I will be looking to buy CAD on the news and will come out of the trade as soon as possible.

What happens if BOC cuts the interest rate?
In that case, we may see a dramatic buying in USD/CAD for at least 100 -200 pips in the first five minute of the news release.

USD – Fed Chair Powell Testifies – 14:00 GMT

Jerome Powell was likely to leave Federal Reserve interest rate cuts firmly on the table when he appears before Congress today, but the forecast has changed since the release of US Nonfarm Payroll data. The latest US jobs report turned down the necessity to lift borrowing costs.

The Fed chairman, who has been sort of bullied for months by President Donald Trump for not cutting rates, will presumably reiterate language from the Federal Open Market Committee’s June statement that it will “act as appropriate’’ to support the economic expansion. However, any shift in sentiment/ tone may bring strong sell-off in the US dollar today.

Good luck!

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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