Fed’s monetary policy statement and its interest rate decision will be published on Friday and a 25-point cut to 2.25% is highly expected, though not as much needed for the economy as it is to anticipate a global slowdown of growth. The monthly payrolls report will also be closely watched on Friday after U.S. labour markets rebounded in June. The unemployment rate is forecast to fall to 3.6% from 3.7% but the average payrolls increase is expected to fall to 160k from 220k in June. The US dollar index has been climbing for a week signalling that investors have largely already taken into account this week’s potential rate cut. They will now be looking for signals on when (and if) there will be further rate cuts in the foreseeable future with many expecting a second cut as early as September. Manufacturing PMI data will also be released this week and a slight increase is expected.
After the ECB last week, BoJ this next Tuesday and Fed’s decision on Wednesday, the Bank of England will be next in line to decide on the interest rate. No move is expected by BoE but after Sterling’s drop to a 28-month low, governor Carney’s statement will be followed for clues on how Brexit is expected to play out and how the BoE will react to the different scenarios. Meanwhile, the British government is stepping up no-deal preparations following EU’s refusal to reopen negotiations. The GBPUSD pair is currently trapped in a downtrend, down 6% since May but with a big support present at $1.2141.
A busy week in the Eurozone with data coming in on GDP and CPI figures to be published on Wednesday. The ECB signalled its intentions to restart the QE program in a few months’ time as some data, especially on inflation, services and manufacturing, has been disappointing. Wednesday figures are expected to be in line with this trend as GDP growth forecast is down to 0.2% from 0.4% in the first quarter of 2019 and inflation is falling to 1.1%, a long way from its 2% target. As both the GBP and the EUR are struggling, support points might be holding on to the 1.11€ level. Failing that, a stronger 1.10€ support could be the new key level depending on this week’s data.
Australian CPI data will be realised on Wednesday and results are expected to be marginally higher this quarter, at 0.5%. Prime Minister Morrison’s tax cuts plan passed parliament at the beginning of the month, a move expected to sustain consumer spending and alleviate pressure on the central bank to sustain the economy after two consecutive cuts on the interest rate which now stands at a record low of 1%.
Also in the Economic Calendar*:
Tuesday:
02:00 JPY BoJ’s Interest Rate Decision
12:00 EUR German Harmonised CPI (Jul)
Wednesday:
01:30 AUD Consumer Price Index (Q2)
09:00 EUR Gross Domestic Product (Q2)
18:00 USD Fed Interest Rate Decision
Thursday:
01:45 CNY Caixin Manufacturing PMI (Jul)
11:00 GBP BoE Interest Rate Decision
11:00 GBP Asset Purchase Facility
14:00 USD ISM Manufacturing PMI (Jul)
23:50 JPY BoJ Monetary Policy Meeting Minutes
Friday:
12:30 USD Non-farm Payrolls and Hourly Earnings (Jul)
(*Times above are in BST)
