The continuation of the world trade war, led by the United States of America and China, the world’s two strongest economies, and as expected from the International Banks and Financial institutions, led to slowing of global economic growth. The first signs were from China with the announcement of economic growth slow down to lowest level in almost 26 years. At the end of last week, it was announced that the U.S GDP started to slow down after recording the longest growth streak in the U.S history.
This performance led central banks around the world to start cutting their interest rates to face the consequences of such slow down, especially as both sides of the trade war continue threating of imposing more tariffs, which confirms to the financial markets and investors that reaching a solution between the two is not going to be an easy endeavor, especially with Trump being know of often negotiating and at the end would impose more tariffs, and this time it would be tough, as the last group of U.S tariffs means imposing customs fees on all imports from China.
In a sudden shift in the Federal Reserve's policy of abandoning the hawkish policy course and starting to soften their policy, by referring to reducing US interest rates to cope with external risk hurdles that have begun to affect US economic sectors. Markets have expected the bank to cut interest rates when its members meet by the end of this week. After that, important US jobs figures will be released. Economic data and events this week will have an important and influential impact on the movements and performance of the Forex currency market. In the following presentation we will highlight the most important of these data and events:
The beginning will be quiet and cautious. Highlight of Monday's includes Japanese retail sales data. From the U.K, the mortgage approvals, net lending to individuals and cash supply data. Late in the day, the New Zealand building permits. These data are of low importance, and prices will not interact with their results, as the complete focus will be on the Federal Reserve policy and the US job numbers.
On Tuesday, the economic calendar will start to get busy. The beginning will come from Japan with the announcement of the unemployment rate and industrial production data. From Australia we will have building approvals. Highlights of the day will be the announcement by the Japanese Central Bank of its monetary policy amid strong expectations that the bank will keep the interest rate unchanged in the negative areas, and pledge to continue to stimulate the Japanese economy, which was adversely affected by the continuation of the global trade war. The US consumer price index, the Fed's favorite inflation gauge, will be released from the United States. The US consumer confidence index will be released amid expectations of continued confidence among the US consumer as the US labor market remains strong.
The most important event of the week will be on Wednesday with the US Federal Reserve's interest rate decision, and the stronger expectations lean towards the bank will cut interest rates by just a quarter point from 2.50% to 2.25% as the first step of the bank to stimulate the US economy, which has begun to be adversely affected by external developments, especially the US trade dispute with global economies. Expectations to cut interest rates by half a point remain weak. The content of the bank's policy statement and the comments of Governor Jerome Powell will be of particular importance, as markets want to know from the bank and its officials whether the first cut in 10 years is to revive the economy and that the next cutbacks will be not be until a long time. A sign to the continuation of US interest rate cut during the rest of 2019 will support stronger losses of the US dollar against other major currencies, and revive commodity prices. Gold will have the greater chance of testing stronger levels.
Prior to this important event, the FX market will react with the announcement of China's Industrial Purchasing Managers Index, amid expectations of a slight rebound in most sectors of the economy, but still in the deflation zone. From Australia, the consumer price index will be released amid expectations of rising inflation in the country and in the last two months, respectively, the Reserve Bank of Australia has cut interest rates to support the Australian economy, which has been negatively affected by the global trade war. From the Eurozone, inflation figures for the region will be announced and the consumer price index is expected to fall again as the bank cited the recent rise in inflation levels to temporary factors that may soon disappear. From the United States, the first US we will have the change in job numbers from (ADP) of non-farm jobs in the country and expectations for a strong job increase to 150,000 new jobs instead of only 102 thousand registered last month.
On Thursday the currency market will continue to be affected by the announcement of Fed policy the day before. Then it will interact with the announcement of Xian Chinese industrial managers index, the official statement will cause a slight recovery, but still in the deflation zone. From Britain, the Bank of England will announce its monetary policy amid strong expectations that the bank will keep its interest rate at 0.75% and its asset purchase plan of 435 billion pounds unchanged. It is expected that the voting of the bank's policy committee on the Bank's plans are going to be unanimous. As in the last meetings, the bank will remain in a position of anticipation and will not move its policy until the future of the Brexit is clear, which is still vague even with the announcement of Teresa May's successor. Boris Johnson, who does not exclude the country's exit from the EU without a deal. From the United States of America, the ISM Industrial Purchasing Managers Index will be released.
On Friday all the focus will be on the announcement of official US job numbers amid expectations that job numbers will start to become weaker. Expectations indicate that the US economy may succeed in adding 160,000 jobs from 224,000 jobs recorded in the previous month and the average wage is expected to stay as is around 0.2%. The US unemployment rate will remain unchanged at 3.7%, rising from 3.6% in the previous month. Nevertheless, the US labor market remains strong, and the Federal Reserve has boasted a strong labor market, which has been the cornerstone of raising the US interest rate four times in 2018. US job results will paint a clear picture of the US dollar performance against other major currencies and give an impression of next week transactions. With the Federal Reserve announcement and job numbers, the picture will be clearer for the future of the world's largest economy.