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Having renewed the local maximum (since October 2002) at 109.20 at the beginning of the last week, the dollar subsequently moved to a decline against the backdrop of disappointing macro statistics from the US, which increased the risks of a recession in the US. "The August PMI data signaled further warning signs for the health of the US private sector," S&P Global Market Intelligence said.
And so, having reached a local intra-week low of 107.52, on Friday the dollar sharply turned up. Fed Chairman Jerome Powell confirmed the tough intentions of the leadership of the American central bank to overcome high inflation in the United States.
“The central bank is purposefully moving policy to a tight enough level to bring inflation back to 2%. Restoring price stability will take some time and will require the decisive use of central bank instruments,” Powell said.
Positive dollar buyers also added the final index of consumer sentiment from the University of Michigan, which was revised upwards in August: 58.2 against preliminary values of 55.1 and expectations at 55.2.
As a result of the past week, the DXY dollar index managed to enter positive territory, remaining above 108.00.
Next week, market participants will study macro statistics for Australia, Germany, China, Eurozone, USA, Canada. But their focus will be the publication on Friday of the US Department of Labor monthly report with data for August.
Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:
*) new events can be added to the calendar and/or some scheduled events canceled during the coming week
Monday, August 29
Banks in the UK are closed on the occasion of a bank holiday (End of Summer). In this regard, trading volumes during the European trading session will be lower than usual.
01:30 AUD Retail Sales
The Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (in June) was +0.2% (after increasing by +0.9% in May and April, +1.6% in March, +1.8% in January in February). If the data turns out to be weaker than the previous value, then the AUD may sharply decline in the short term, above the previous values, then the AUD is likely to strengthen. Forecast for July: +0.3%.
Tuesday, August 30
12:00 EUR Harmonized Consumer Price Index (HICP) in Germany (First Estimate)
This index is published by the EU Statistical Office and is calculated on the basis of a statistical methodology agreed between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative one weakens it. Previous indicator values: +8.5% in July, +8.2% in June, +8.7% in May, +7.8% in April, +7.6% in March, +5.5% in February, +5.1% in January (in annual terms). If the data for August turn out to be better than the previous values, then the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data suggests increasing inflationary pressures in Germany. The data is worse than the previous value will negatively affect the euro.
Forecast: +8.7% in August (according preliminary estimate).
Wednesday, August 31
01:00 CNY Chinese Federation of Logistics and Procurement (CFLP) PMIs of Business Activity in Manufacturing and Services in China
These indicators assess the state of the service and manufacturing sectors in the Chinese economy. A result above 50 is considered positive and strengthens the yuan. Previous PMI values for the manufacturing sector: 49.0 in July, 50.2 in June, 49.6 in May, 47.4 in April, 50.1 in January, 50.3 in December, 50.1 in November, 49.2 in October, 49.6 in September. The relative growth of the index and the indicator above the value of 50 should have a positive effect on the CNY. The data above the value of 50 indicates an increase in activity, which has a positive effect on the quotes of the national currency. In the opposite case, and if the indicator is below 50, the yuan will be under pressure and, probably, will decline.
Previous PMI values for the services sector: 53.8 in July, 54.7 in June, 47.8 in May, 41.9 in April, 51.1 in January, 52.7 in December, 52.3 in November, 52.4 in October, 53.2 in September. The indicator is above 50, which is likely to have a positive effect on the yuan quotes, even with a slight relative decline. If the indicator is below 50, the yuan will be under pressure and likely to decline.
Forecast for August: 49.2 and 52.2, respectively.
09:00 EUR Consumer Price Index. Core CPI (Pre-release)
The Consumer Price Index (CPI) is published by Eurostat and measures the price change of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changes in purchasing habits. A positive result strengthens the EUR, a negative one weakens it.
Forecast for August 2022: +9.0% (annualized) vs. +8.9% in July, +8.6% in June, +8.1% in May, +7.4% in April and March, +5.9% in February, +5.1% in January. If the data turns out to be worse than the forecast, then the euro may drop sharply in the short term. Data better than the forecast and / or the previous value may strengthen the euro in the short term. Recall that the target level of consumer inflation by the ECB is slightly below 2.0%, and the data point to accelerating inflation in the Eurozone, and the ECB management promises to take "all necessary steps" to return inflation to the target range.
The Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy have been excluded from this indicator to provide a more accurate estimate. A high result strengthens the EUR, and a low result weakens it. In January 2022, the core CPI increased by +2.3% (in annual terms), in February - by +2.7%, in March – by +2.9%, in April – by +3.5%, in May – by +3.8%, in June – by +3.7%, in July – by +4.0%. The data indicate that inflation is accelerating.
If the data for August 2022 turns out to be worse than the previous value or forecast, then this may negatively affect the euro. If the data turns out to be better than the forecast or the previous value, then the euro is likely to react with an increase in quotations. Core inflation in the Eurozone is accelerating, which is positive (under normal economic conditions) for the euro. Forecast for August: +4.1%.
12:15 USD ADP Private Sector Employment Report
Typically, the ADP's private sector employment report has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. It is expected that the growth in the number of employees in the US private sector in August was +200,000 (against an increase of 128,000 in May, 202,000 in April, 249,000 in March, 601,000 in February, 5125,000 in January 2022). The relative growth of the indicator may have a positive effect on the dollar quotes, while the relative decline in the indicator - negatively. The market reaction may be negative, and the dollar may decline if the data also turns out to be worse than the forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. The bulk of layoffs were concentrated in tourism and retail. Other important sectors of the economy were also affected. ADP previously reported that the most significant drop in employment was recently noted in the construction and financial services sectors.
Although the ADP report does not directly correlate with the official US Department of Labor data on the labor market, which will be released on Friday, however, the ADP report is often a harbinger of it, having a noticeable impact on the market.
12:30 CAD Canadian GDP. Annual data on GDP of Canada
The Canadian GDP Report is published by Statistics Canada. A strong report will strengthen CAD. A weak GDP report will have a negative impact on CAD. The previous report pointed to zero Canada's GDP growth (in May).
The quarterly report on Canada's GDP reflects the total volume of all goods and services produced by Canada for the quarter (in annual terms), and is considered an indicator of the overall state of the Canadian economy.
In the previous 1st quarter of 2022, GDP grew by +3.7% (after growing by +6.6% in Q4 2021, +5.5% in Q3, down -3.6% in Q2, up +4.7% in Q1 2021 of the year). If the data for the 2nd quarter of 2022 turns out to be stronger than the previous value and / or forecast, then the CAD will strengthen. Forecast for Q2 2022: +4.3%.
Thursday, September 01
06:00 EUR Retail sales in Germany
Retail sales is the main indicator of consumer spending in Germany, showing changes in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Previous values: -1.6% (-8.8% yoy) in June, +0.6% (-3.6% yoy) in May, -5.4% (-0.4% yoy) in April, -0.1% (-2.7% yoy) in March, +0.3% (+7.0% yoy) in February, +2.0% (+10.3% yoy) in January, -5.5% (0% yoy) in December, +0.8% (+0.5% yoy) in November, +0.5% (-2.9% in annual terms) in October, -1.9% (-0.6% in annual terms) in September 2021. The data indicate the instability of the recovery of this sector of the German economy. Data better than the forecast and/or the previous value is likely to have a positive impact on the euro, but - in the short term. Forecast for July: +0.2% (-8,0% yoy).
14:00 USD Index (PMI) of business activity (from ISM) in the manufacturing sector of the US economy
Published by the Institute for Supply Management (ISM), the US Manufacturing PMI is an important indicator of the health of the US economy as a whole. A result above 50 is seen as positive and strengthens the USD, below 50 as negative for the US dollar. Forecast: 52.6 in August (against 52.8 in July, 53.0 in June, 56.1 in May, 55.4 in April, 57.1 in March, 58.6 in February, 57.6 in January). The index is above the 50 level and has a relatively high value, which, despite a relative decline, is likely to support the dollar. The data above the value of 50 indicates an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast, and especially below the value of 50, the dollar may sharply weaken in the short term.
12:30 USD Average hourly wage. The number of new jobs created outside the agricultural sector. Unemployment rate
The most important indicators of the state of the labor market in the United States for August. Forecast: +0.3% (vs. +0.5% in July, +0.3% in June, May and April, +0.4% in March, 0% in February, +0.7% in January 2022, +0.6% in December, +0.3% in November, +0.4% in October, +0 .6% in September and August 2021) / +0.290 million (vs. +0.528 million in July, +0.372 million in June, +0.390 million in May, +0.428 million in April, +0.431 million in March, +0.678 million in February, +0.467 million in January 2022, +0.199 million in December, +0.210 million in November, +0.531 million in October, +0.194 million in September, +0.235 million in August 2021) / 3.5% (versus 3.5% in July, 3.6% in June, May, April and March, 3.8% in February, 4.0% in January 2022, 3.9% in December, 4.2% in November, 4 .6% in October, 4.8% in September, 5.2% in August 2021), respectively.
In general, the indicators can be called encouraging. The data speaks of continued improvement in the US labor market after plummeting in the first half of 2020. Prior to the coronavirus, the US labor market remained strong, signaling the stability of the American economy and supporting dollar quotes.
It is often difficult to predict the market reaction to the publication of indicators, because many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, because the economic situation in the United States and many other large economies remains controversial due to the coronavirus. In any case, when data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the entire financial market. Probably the most cautious investors will choose to stay out of the market during this time.
