Weekly Outlook, Nov 23-27: Top Economic Events to Watch This Week
Arslan Butt • 4 min read
The broad-based US dollar managed to erase its early losses and started to gain some positive traction against many currencies as the week drew to a close, but market traders are expecting some losses, as the rising COVID-19 infection rates in the US keep fueling doubts over the economic recovery in the US, which is undermining the greenback. Apart from this, the hopes of a stimulus-led recovery declined after US Treasury Secretary Steven Mnuchin said that the Federal Reserve COVID-19 pandemic funds programs to help businesses and local governments, would expire by the end of 2020, which in turn increased chances that the Fed could boost bond purchases or implement negative rates. In that case, the US dollar could face further losses.
Looking ahead into the coming week, the series of manufacturing and services PMI figures, along with the minutes of the FOMC Meeting and the Monetary Policy Report Hearings, can drive plenty of headlines to keep the markets on the move. Besides this, the geopolitical tensions and coronavirus headlines will also be closely followed, as they could play a key role in determining risk levels in the market.
Top Five Economic Events to Watch This Week
German Flash Manufacturing PMI:
This data is typically released by Markit Economics, which focuses on the measurement of business conditions in the manufacturing sector. However, the manufacturing PMI is an important indicator of business conditions and Germany’s overall economic condition, as it dominates a large part of the total GDP. Thereby, a result above 50 is seen as positive or (bullish) for the EUR currency. Conversely, a result below 50 is seen as unfavorable or bearish for the EUR currency.
DATE: 11/02/2020 08:55
From the projected view, German Flash Manufacturing PMI data is expected to drop from 58.2 to 56.0, which might not have any bearish impact on the EUR currency, as the projected figures are still above 50.
German Flash Services PMI:
This data is usually released by Markit Economics. It is based on reports by many business executives in the service sector and private sector manufacturing. Normally, this data is released on the 3rd working day of each month. Each response is weighted as per the size of the company and its contribution to the total manufacturing or services output, accounted for by the sub-sector to which that company belongs. Responses from larger businesses have a much larger impact on the final index numbers than those of small companies. The data is presented by showing the percentage of respondents reporting an improvement, contraction or no change since the previous month. Thus, figures above 50 tend to show an increase (or improvement) in the economy, whereas those below 50 indicate a decrease (or contraction) in the economy.
DATE: 11/04/2020 09:00
From the projected view, the German Flash Services PMI is expected to drop from 49.5 to 46.1, which tends to undermine the EUR currency.
2: UK Flash Services PMI:– Monday 9:30GMT
UK Flash Services PMI:
This data is typically released by both the Chartered Institute of Purchasing & Supply and Markit Economics. It is an indicator of the economic condition of the UK services sector. It tends to measures an overview of the conditions relating to sales and employment. However, the UK service sector does not influence the GDP, either positively or negatively, compared to the Manufacturing PMI. Any figures above 50 tend to show expansion in the economy. Conversely, a reading under 50 shows a contraction of the economy.
DATE: 11/04/2020 09:30
From the projected view, the UK Flash Services PMI is expected to drop from 51.4 to 43.2, which tends to undermine the GBP currency.
3: UK Monetary Policy Report Hearings – Monday 15:30 GMT
Monetary Policy Report Hearings:
During these speeches, the Governor of the BOE and several MPC members discuss the economic outlook and inflation in Parliament’s Treasury Committee. The discussions continue for several hours, which can create market volatility for the duration. The direct comments regarding the currency markets are of particular interest to investors. If the tone is more hawkish than expected, it tends to underpin the GBP currency; conversely, the dovish tone has a negative or bearish impact on the GBP.
4: CB Consumer Confidence – Tuesday 15:00GMT:
CB Consumer Confidence:
This data is typically released by the Conference Board. It measures the level of confidence that individuals have in economic activities. A high level of consumer confidence shows economic expansion, while a low level indicates an economic downturn. Thereby, a high reading is seen as positive or bullish for the USD currency; conversely, a low reading is seen as negative or bearish for the greenback.
DATE: 10/27/2020 14:00
From the projected view, the CB Consumer Confidence is expected to drop from 100.9 to 98.3, which is likely to undermine the USD currency.
5: RBNZ Governor Orr Speaks – Wednesday 2:00 GMT
RBNZ Governor Orr Speaks:
As already mentioned above, Adrian Orr will has the office of Governor of the Reserve Bank of New Zealand from March 2018 to Mar 2023. The Reserve Bank uses monetary policy to maintain price stability, as defined in the Policy Targets Agreement (PTA). The current PTA requires the bank to keep inflation between 1 and 3 percent on average, over the medium term. The bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year. In that way, if the tone is more hawkish than expected, it tends to underpin the currency; conversely, a dovish tone has a negative or bearish impact on the currency.
6: Minutes of the FOMC Meeting – Wednesday 2:00 GMT
Minutes of the FOMC Meeting:
FOMC stands for The Federal Open Market Committee. The group organizes eight meetings per year, in which financial and economic conditions are reviewed, the appropriate stance of monetary policy is determined, and the risks to its long-run goals of price stability and sustainable economic growth are evaluated. It is also worth reporting that the FOMC Minutes are normally released by the Federal Reserve Board of Governors. They are a clear guide to the future US interest rate policy. Thereby, if the tone is more hawkish than expected, it tends to underpin the currency. Conversely, a more dovish tone has a negative or bearish impact on the currency.
7: US Unemployment Claims – Wednesday 13:30GMT
US Unemployment Claims:
This data is typically released by the US Department of Labor. It givs us a measure of the number of people filing first-time claims for state unemployment insurance. In simple words, it provides a measure of the strength of the labor market. However, a larger-than-expected number shows weakness in this US market, which tends to undermine the US economy. Therefore, the declining figures should be taken as positive or bullish for the greenback; conversely, high figures are seen as negative or bearish for the USD.
ACTUAL: 742 K
CONS: 707 K
DATE: 11/19/2020 13:30
From the projected view, US Unemployment Claims are expected to drop from 742K to 733K, which might lend some support to the US dollar. Have a nice weekend!