FX Week Ahead: New trading week marks the start of the third quarter

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The markets open to a busy trading week which marks the first week of the third quarter. Focus turns to some of the key economic indicators across most of the G7 currencies.

Starting off the week we have the BoJ Tankan Survey where manufacturing and non-manufacturing PMI’s will be released. Alongside, the UK and the Eurozone’s monthly manufacturing and services PMI are also expected over the week.

The focus of course will be the data from the U.S. which, this week will see the release of the ISM’s manufacturing PMI and the official payrolls report for the month of June.

Among central bank policy meetings, the RBA is scheduled to hold its monetary policy meeting on Tuesday but no changes are expected to the interest rates. Later in the week, the Australian retail sales and trade balance figures will be released.

Here’s a quick recap of the economic events for the week ahead.

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USD: ISM, Payrolls to dominate the newswires this week

Economic data from the U.S. for the week ahead is expected to be busy with the start of a new trading week. The U.S. markets are closed on July 4th due to the Independence Day.

The Institute of Supply Management (ISM) will be releasing the monthly manufacturing PMI report on Monday. According to the economists polled, the manufacturing PMI is expected to ease slightly to 58.2. This marks a moderate decline compared to 58.7 that was registered in May.

Later on the week, on Thursday the ADP/Moody’s private payrolls figures are expected. Economists forecast that private sector hiring added 180k jobs in the month of June on a seasonally adjusted basis. This marks a somewhat higher pace of job gains compared to 178k jobs that were added the month before.

On Thursday, the ISM’s non-manufacturing PMI data is expected to show a decline in the index from 58.6 in May to 58.1 in June.

Thursday concludes with the release of the FOMC’s meeting minutes from June. The meeting minutes cover the Fed meeting where officials hiked interest rates by 25 basis points and also signaled an additional rate hike, bringing the total rate hikes in 2018 to four.

Friday will of course be dominated by the nonfarm payrolls report. Economists project that payrolls increased 195k on the month in June a slightly slower pace compared to the 223k print seen the month before.

The U.S. unemployment rate is expected to hold steady at 3.8% while wage growth is expected to rise 0.3% on the month.

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UK PMI’s to confirm Q2 GDP

Data from the UK for the week ahead will see the release of the manufacturing, construction and services PMI’s for the month of June. The data will be of some importance as investors analyze how the UK’s economy had fared in the second quarter of the year.

The UK’s GDP advanced at one of the slowest pace of just 0.1% on the quarter in the three months ending March 2018. Officials at the Bank of England continued to remain optimistic that the first quarter soft patch was only temporary.

With the June PMI figures coming up this week, it could potentially shed light on how well the UK’s economy advanced in the second quarter. The Bank of England, at its recently concluded monetary policy meeting signaled that interest rates will start to rise again.

The markets are somewhat anticipating that the Bank of England could hike rates as early as the August monetary policy meeting. Still, a lot would be dependent on how the UK’s economy has performed in the first quarter.

An unchanged pace of GDP growth or even worse, a subdued pace of GDP growth could put policymakers in a tight spot as they face higher inflation and a subdued pace of wage growth and a potentially stagnating economy.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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