Forex Week Ahead (Jul 19 – 23, 2021): Top Economic Events to Watch This Week
Arslan Butt • 4 min read
The broad-based US dollar is going to end this week on the bullish track, boosted by the investors’ run-up toward safety, as rising numbers of COVID-19 infections have raised doubts over recovery from the pandemic. In the meantime, mounting concerns about a quicker-than-expected US interest rate hike are also playing a significant role in supporting the US currency.
The upticks in the US dollar were relatively unaffected by Fed Chair Powell’s comments that rising inflation was likely to be transitory and that the US central bank would continue to support the economy. Apart from this, the solid US key economic data that was released recently exerted some additional positive impact on the US dollar.
Moving forward into the next week, the series of Retail Sales and Monetary Policy Statements, along with the German Flash Manufacturing PMI, and Flash Manufacturing PMI, will control the direction of the market. Across the ocean, the chatter surrounding COVID-19 infections and geopolitical tension headlines will also be essential to watch. They could play a key role in determining risk levels in the market.
Top Economic Events to Watch This Week
1 – Minutes of the Monetary Policy Meeting Minutes – Tuesday – 2:30 GMT
The minutes of the Reserve Bank of Australia meetings are usually released two weeks after the interest rate decision. The minutes give a complete record of the conversations between the RBA’s board members, regarding economic conditions and monetary policy that influence their decision to adjust interest rates and bond buys.
They also record the votes of the individual members of the Committee. In addition to this, they also share their thoughts on international economic developments and the exchange rate value in the minutes.
In simple words, if the RBA delivers a hawkish view about the inflationary outlook for the economy, then the markets see a higher probability of a rate hike, and that is understood as bullish for the Australian dollar.
Conversely, suppose the RBA delivers a dovish view about the inflationary outlook for the economy, the markets would see a higher probability of a rate cut, which in turn is seen as bearish for the Aussie currency.
2 – AUD Retail Sales (MoM) – Wednesday – 2:30 GMT
The Australian Bureau of Statistics publishes this data. It is a survey of goods sold by retailers, based on a sampling of retail stores of different types and sizes. It is considered a key indicator to measure the pace at which the Australian economy is growing or shrinking.
In simple words, the data shows the performance of the retail sector over the short and mid-term. Positive economic growth has a bullish effect on the Australian currency, while a downward reading is seen as negative (or bearish) for the AUD.
ACTUAL: 0.4 %
CONS: 0.1 %
DATE: Mon Jul 5, 2021 01:30
3 – Crude Oil Inventories – Wednesday – 15:30 GMT
The EIA Crude Oil stockpiles report is a weekly measure of the change in the number of barrels in stocks of crude oil and its derivatives. It is released by the Energy Information Administration.
It is a US key indicator and mainly affects the Canadian dollar, due to Canada’s sizable energy sector. This report tends to affect the price of oil itself and consequently, it impacts WTI crude futures.
This report is the primary gauge of imbalances in supply and demand in the market, leading to changes in production levels and price volatility. If ‘Actual’ is less than ‘Forecast’, it is seen as bullish for the USD.
CONS: – 4.359M
4 – ECB Monetary Policy Statement and Press Conference – Thursday – 12:45 GMT
Following the European Central Bank’s economic policy decision, the President of the central bank holds a press conference regarding the monetary policy. Her comments play a significant role in influencing the volatility of the European currency and determine a short-term bullish or bearish trend. It is worth recalling that the ECB unanimously approved an updated monetary policy strategy last week.
In the coming week, Christine Lagarde and her colleagues will decide whether the changes to the strategy will prompt changes to the policies. Besides this, they will discuss the economic outlook and give fresh clues on future decisions.
If the tone of the ECB is hawkish regarding the inflationary outlook of the economy and the interest rates increase, it would be seen as positive for the European currency. Conversely, if the ECB has a dovish view of the European economy and keeps the interest rate low, or reduces it further, that would be seen as bearish for the European currency.
Rumors are circulating that policy rates will remain at their present rate or lower until the European Central Bank has seen the inflation outlook robustly converging to a level close to, but below 2%, within the projection horizon.
5 – US Unemployment Claims – Thursday – 13:30 GMT
The US Department of Labor publishes the Initial Jobless Claims, which measure the number of people filing first-time claims for state unemployment insurance.
If the figures rise unexpectedly, it indicates weakness in this US labor market, which has a bearish impact on the strength and direction of the US economy. Conversely, a decline in the figures is seen as positive for the US currency.
6 – German Flash Manufacturing PMI – Friday – 8:30 GMT
German Flash Manufacturing PMI – Markit Economics releases this data, the aim of which is to examine business conditions in the manufacturing sector. The manufacturing PMI is a key indicator of business conditions and the overall economic conditions in Germany, as the manufacturing sector controls a large part of the total gross domestic product (GDP).
A result above 50 is viewed as bullish for the European currency, while a result below 50 is understood as bearish for the European currency.
DATE: Friday, Jul 23, 2021 07:55
ii) – French Flash Services PMI – Markit Economics publishes this data, which captures business conditions in the services sector. As the services sector controls a large part of the total gross domestic product (GDP), the services PMI is a crucial indicator of the overall economic conditions in France.
If the result is above 50, it is viewed as bullish for the European currency; on the other hand, a figure below 50 is considered bearish for the European currency.
DATE: Friday, Jul 23, 2021 07:50