The forex market saw a strong activity during last week's trading, supported by several important factors, especially the hints from the US Federal Reserve regarding the next interest rate decision and optimism about a near agreement between the two largest economies in the world to resolve their trade dispute, which lasted for more than 15 months, during the 13th round between them in Washington. Positive Brexit developments strongly contributed to Sterling's gains against other major currencies as the Brexit parties - the European Union and Britain - are close to salvaging the situation two weeks before the Brexit official date of Oct. 31, as a no-deal Brexit is devastating for both sides and heightens tensions on the future of the world economy. The Euro continues to suffer from the slowdown of the Eurozone economy led by Germany, and recent gains have not yet amounted to a reversal of the hard decline in pace against other currencies. The European single currency is on a close date of Christine Lagarde taking over as ECB president to succeed Mario Draghi, and is expected to follow the stimulus plans initiated by the bank and will ask member states to provide domestic stimulus to help the bank's recovery plans.
In the following lines we will review together the most important factors that will affect the movements of currencies this week:
Monday: as the week trading begins, the market will move based on last week's events, inlight of the holiday in Japanese, Canadian and US markets.
Tuesday: Australia's Monetary Policy Meeting Minutes: The Reserve Bank of Australia releases the latest Monetary Policy Meeting Minutes two weeks after the monetary interest rate announcement. The statement provides a detailed account of the last meeting of the Central Bank Board to decide on the interest rate. It also provides insights into the economic conditions that have influenced their decision.
Bank of England Governor Mark Carney Comments on the same day: Bank of England Governor Mark Carney is due to testify before the Treasury Committee for the financial stability report in London. The British Pound is often volatile during his comments, as traders try to understand the direction of future interest rates.
New China loans: Chinese banks have made net new loans worth 1.21 trillion Yuan in August, compared with 1.06 trillion Yuan in the previous month. Analysts had expected banks to provide 1.20 trillion Yuan in new loans. Household loans, mostly mortgage loans, increased to 653.8 billion Yuan in August from 511.2 billion Yuan in July. Corporate loans rose to 651.3 billion Yuan from 297.4 billion Yuan. Foreign currency loans fell 1.4 billion US dollars.
Forecasts for September 2019: 1.35 billion Yuan loans.
New Zealand consumer price index: In New Zealand, the consumer price index rose by 0.6 per cent in the June quarter of this year, driven by housing, utilities, food prices, household requirements, services and transport. Forecast for September 2019: 0.6 percent.
Wednesday: Britain's consumer price index: In the UK, annual inflation fell to 1.7 percent in August from 2.1 percent the previous month, surpassing the Bank of England's inflation target. This month's reading came in below analysts' expectations of 1.9 percent. This was the lowest inflation rate since December 2016, and was driven by lower transport costs and a drop in clothing and footwear prices. Forecast for September 2019: 1.8% inflation.
in the same day, Canadian Consumer Price Index: In Canada, consumer prices fell -0.1% in August from the previous month. Expectations for September 2019: Inflation is expected to fall by -0.3 percent.
US Retail Sales: In the US, retail trade increased by 0.4 percent month-on-month in August, following a revised 0.8 percent gain in July. This month's reading exceeded analysts' forecasts for a 0.2 percent increase. Retail trade was boosted by spending on building materials, cars, healthcare and hobbies. Meanwhile, core retail trade, which excludes automobiles, remained unchanged in August, after a 1.0 percent increase the previous month. Analysts' forecasts for the month is a drop by 0.1 percent.
Expectations for September 2019: Retail sales and core retail sales are expected to increase by 0.3 per cent and 0.2 per cent respectively.
Comments of Bank of England Governor, Mark Carney: Bank of England Governor Mark Carney is scheduled to speak at an IMF event in Washington, DC. The British Pound is often volatile during his comments, as traders try to understand the future direction of interest rates.
Thursday: Australian job numbers: In Australia, the employment rate rose by 34.700 thousand jobs to reach a total of 12.93 million in August after adjusting the previous month's reading down to 36.400 thousand jobs recorded in July. This month's reading beat analysts' expectations of 10,000 jobs. Full-time jobs fell by 15,500 and part-time work increased by 50,000. On a seasonally adjusted basis, the unemployment rate rose to 5.3 percent from 5.2 percent the previous month. The month's reading was in line with analysts' expectations. This was the highest unemployment rate since August last year. The number of unemployed in Australia has increased by 4,100.
Outlook for September 2019: Australia is expected to add 15,300 jobs, while the country's unemployment is expected to remain at 5.3 percent.
UK Retail Sales: In the UK, retail sales fell by -0.2 percent month-on-month in August after the prior month's reading was revised up to 0.4 percent. Analysts had expected retail sales to remain unchanged in August. Out-of-store retail sales, especially online sales, fell 3.2 percent. This was the biggest drop in sales since August 2015. In addition, sales of textiles, clothing and footwear fell 0.1 percent. On the other hand, sales of household goods, fuel and food increased. Year-on-year, retail growth slowed to 2.7 percent from 3.4 percent in July. The annual reading for August exceeded analysts' expectations of an increase of 2.9%.
Monthly forecast for September 2019: Retail sales are expected to decline by -0.1 percent.
US Philadelphia Industrial Index: In the United States, the Philadelphia Fed Manufacturing Index, in relation to the current year activity, fell 4.8 points on a monthly basis to 12 in September. However, this month's reading exceeded analysts' expectations of 11, while the current new orders index fell slightly, but the current consignment index rose. Meanwhile, both delivery times and indices of unsold orders remained positive in September. In contrast, companies reported a general improvement in employment in the manufacturing sector during the month. About 25 percent of companies reported higher employment opportunities, but 9 percent reported a decline in employment. The employment index and average work week also recorded increases.
Forecasts for October 2019: a 7.3% reading.
US crude oil inventories: In the United States, crude oil inventories rose by 2.927 million barrels during the week ended October 4, after an increase of 3.1 million barrels in the previous week. Analysts had expected crude inventories to increase by 1.413 million barrels during the week. Gasoline inventories fell by 1.213 million barrels after a 0.228 million barrel drop the previous week. Economists had expected a decline of 0.257 million barrels.
Friday: China's GDP: The world's second-largest economy grew 6.2 percent year-on-year in the June quarter, slowing from 6.4 percent growth in the previous period. The June reading is in line with analysts' expectations. This was the lowest GDP growth rate since the March quarter of 1992 due to persistent trade tensions, weak global demand, and the alarming level of off-balance sheet borrowings provided by local governments. The outlook for the September quarter 2019: growth rate of 6.1 percent.