USD on Watch

Daily Briefing, July 29 – Economic Events Outlook – Sentiments in Play

Posted Monday, July 29, 2019 by
Arslan Butt • 3 min read

Good morning, traders.

I hope you had a great weekend and are ready for this week as it’s going to be one of the most active weeks. Investors expect rate decisions from BOJ, BOE, and FED along with the Non-farm payroll data.

On Monday, the market is likely to continue trading based on sentiments due to the absence of economic events. The dollar traded firm staying near a two-month high against a basket of peers after better-than-expected US GDP figures released last week. With this, the Fed rate cut sentiment gets weaker and ultimately supports the US dollar.

Let’s take a look at key economic events that can impact the markets today.

Watchlist – Top Economic Events Today

EUR- Spanish Flash CPI y/y – 7:00 GMT

The consumer prices index or inflation accounts for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.

Economists are expecting a slight rise in the inflation rate from 0.4% to 0.6%, but this figure is still way lower than the 1% inflation rate in January 2019 and 2.3% in the Q4 of 2018. ECB gets one more reason to keep ti’s tone dovish. EUR/USD can stay bearish over these events unless the report surprises us with a surge of more than 1% in CPI.

GBP – M4 Money Supply m/m – 8:30 GMT

It shows a change in the total quantity of domestic currency in circulation and deposited in banks. It’s also one of the low impact economic events, but may help us determine Sterling’s trend for a short while as we don’t have any top tier event today.

M4 Money Supply is likely to rise by 0.2% vs. -0.1%. It’s positively correlated with interest rates – early in the economic cycle an increasing supply of money leads to additional spending and investment, and later in the cycle expanding money supply leads to inflation.

Therefore, if the actual figure comes in greater than forecast can be considered good for Sterling and may drive slight upward movement in GBP/USD prices today and vice versa.

GBP – Mortgage Approvals – 8:30 GMT

The report shows the number of new mortgages approved for home purchases during the previous month. The event tends to have a muted impact because about 60% of all mortgages are covered by the BBA Mortgage Approvals data released a few days earlier.

Well, 40% is still on the cards, and economists expect 66K new mortgages approved vs. 65K during the last month.

The mortgage is a capital investment and people go for mortgages when they are confident about their jobs, business, and economy. Positive/ greater number is considered good for the currency. Let’s keep an eye on it.

GBP – Net Lending to Individuals m/m – 8:30 GMT

The figure reports a change in the total value of new credit issued to consumers. Just like M4 Money Supply, the data is correlated with consumer spending and confidence. Rising debt levels are a sign that lenders feel comfortable issuing loans, and that consumers are confident in their financial position and eager to spend money.

Figures are expected to rise to 4.4B vs. 3.9B in June. The rise in debt level shows consumer confidence in their ability to return loans and business activities. The bigger amount may underpin Sterling today.

JPY – Unemployment Rate – 23:30 GMT

Ahead of the Bank of Japan interest rate decision, the Japanese unemployment rate and prelim industrial production will be in focus to capture any price action in JPY.

The unemployment rate expected to be 2.4% vs. 2.4% previously, and it’s likely to go muted due to stable data

JPY – Prelim Industrial Production m/m – 23:30 GMT

Well, industrial production can drive some moves in the market, especially, when it’s expected to drop from 2% to -1.8% this month. For beginners, it’s a leading indicator of economic health – production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and earnings.

Good luck for today!

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