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Forex Major Currencies Outlook (June 29 – July 3)

NFP, PMI data from China as well as preliminary June inflation from EU will headline the week. Please note that due to the Independence Day holiday US markets will be closed on Friday, causing lower liquidity and increased volatility, thus NFP data will be published on Thursday.

USD 

Final Q1 GDP reading came in at -5%, same as the second reading. In comparison to the second reading personal consumption and investments declined but they were supplemented by the rise in government spending. Bounce back was seen in durable goods orders which came in at 15.9% m/m vs -18.1% m/m the previous month. Initial jobless claims continued to fall down but slower than expected and for the week ending June 20 they came in at 1480k vs 1320k as expected bringing the total number of claims since March 21 to over 47 million. Continuing claims for the week ending June 13, the week in which NFP is calculated, came in at 19 522k vs 20 000k as expected. Personal spending data came in at 8.2%, up from -12.6% the previous month while personal income fell to -4.2% from upwardly revised 10.8% the previous month. Once economy reopened spending rebounded propped by government stimulus cheques. 

White House trade adviser Peter Navarro stated that President Trump decided to terminate the China trade deal saying it was over. The statement led to huge risk off sentiment in the market and Navarro retracted it later on saying that his comment “was taken out of context” which lead to the return of risk sentiment in the markets. President Trump tweeted that the deal is fully intact in order to clear things up and appease the markets. After stress test for banks was conducted the Fed has capped dividend payouts at Q2 levels and banned share buybacks in Q3. 

This week we will have ISM manufacturing PMI, FOMC minutes, trade balance data and this week on Thursday NFP numbers. Expectations are very wide with headline number ranging from -1.2 million to 3 million with the unemployment rate expectations ranging from 15.1%. to over 20%. 

Important news for USD: 

Wednesday:

  • ISM Manufacturing PMI
  • FOMC Minutes

Thursday:

  • Nonfarm Payrolls
  • Unemployment Rate
  • Trade Balance 

EUR 

Preliminary PMI numbers for June all showed improvements compared to May. Manufacturing came in at 46.9 up from 39.4 the previous month, services came in at 47.3 up from 30.5 the previous month and composite came in at 47.5. French and German readings attributed to positive numbers. French readings even went above 50 level indicating expansion; however, it is only due to the reading being compared to previous month. Markit noted that output and demand are still falling in EU but at the slower pace. "The job market remains a particular area of concern, especially if demand fails to pick up sharply in coming months. We therefore continue to expect GDP to slump by over 8% in 2020 and, while the recovery may start in the third quarter, momentum could soon fade meaning it will likely take up to three years before the Eurozone regains its pre-pandemic level of GDP." 

Ifo business climate rose to 86.2 from 79.5 the previous month while expectations category jumped to 91.4 from 80.1 the previous month. Ifo economist Wohlrabe stated that the economy is on the upward path now with expectations for German Q3 GDP growth of around 7%. ECB introduced new repo facility, EUREP for central banks outside of the euro area in order to provide more euro liquidity. Central banks will be able to borrow funds and use euro-denominated debt as a collateral. This program will run through June of 2021. 

This week we will have sentiment data, preliminary inflation data for June as well as final June PMI data. 

Important news for EUR: 

Monday:

  • Economic Sentiment Indicator
  • Consumer Confidence

Tuesday:

  • CPI

Wednesday:

  • Markit Manufacturing PMI (EU, Germany, France)

Friday:

  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France) 

GBP 

Preliminary manufacturing PMI for June returned to expansion territory with 50.1 while services improved to 47 and lifted the composite to 47.6. The return of manufacturing above 50 level coincides with the reopening of plants. Markit states that economy is likely to return to growth in Q3 and add "Uncertainty over recovery prospects and job prospects also mean demand for many goods, especially non-essential big-ticket items, is likely to remain weak for many months, with Brexit uncertainty also continuing to cast a shadow over the economy." 

Prime Minister Johnson announced relaxation of lockdown measures. Tourism and hospitality can resume on July 4 and social distancing rules will be relaxed as well. New social distancing requirement will be for 1 meter instead of 2 meters previously. The decision is positive for pound and it sent GBP pairs up at the beginning of the week. 

This week we will have final Q1 GDP data as well as final June PMI data. 

Important news for GBP: 

Tuesday:

  • GDP

Wednesday:

  • Markit Manufacturing PMI

Friday:

  • Markit Services PMI
  • Markit Composite PMI 

AUD 

RBA Governor Lowe stated that they are not concerned with current level of AUD but they would like to see it lower at some point. He stated that it is hard to argue that AUD is overvalued and reiterated that rates will stay at current level for years in order to support economic recovery. 

This week we will have trade balance and consumption data from Australia as well as official and Caixin PMI data from China. 

Important news for AUD: 

Tuesday:

  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

Wednesday:

  • Caixin Manufacturing PMI (China)

Friday:

  • Trade Balance
  • Retail Sales
  • Caixin Services PMI (China)
  • Caixin Composite PMI (China) 

NZD 

RBNZ has left the official cash rate unchanged at 0.25% as widely expected. They have also left their QE program unchanged at NZD60bn adding that they will review the program regularly. The appreciation of the Kiwi puts additional pressure on export earnings and tilt the balance of economic risks to the downside. The meeting was a non-event although it had a dovish tone with RBNZ leaving the option of increasing QE open. Trade balance in May came in at NZD1253m vs NZD1290m as expected with 

CAD 

In his first public speech as the Governor of BOC Tiff Macklem stated that they will continue purchasing at least CAD5bn a week in federal bonds until the economy is on the right path to recovery. He also added that the bank prefers asset purchase programs over negative interest rates. Fitch rating agency has downgraded Canada’s credit rating from AAA to AA+ with a stable outlook due to the emergency spending which raised debt to GDP ratio to go over 100% level (115%). 

This week we will have GDP for April and trade balance data. 

Important news for CAD: 

Tuesday:

  • GDP

Thursday:

  • Trade Balance 

JPY 

Preliminary manufacturing PMI number for June continued to decline and came in at 37.8 vs 38.4 the previous month while services staged a comeback to 42.3 from 26.5 the previous month, pushing the composite reading to 37.9. Manufacturing falling with services and composite below 50 indicates a rough path ahead for the economy. Headline Tokyo area inflation data for June came in at 0.3% y/y, ex-fresh food category came in at 0.2% y/y while ex-fresh food, energy came in at 0.4% y/y. All of the readings came as expected. 

This week we will have consumption, employment and industrial production data as well as final June PMI data. 

Important news for JPY: 

Monday:

  • Retail Sales

Tuesday:

  • Unemployment Rate
  • Industrial Production

Wednesday:

  • Markit Manufacturing PMI

Friday:

  • Markit Services PMI
  • Markit Composite PMI 

CHF 

SNB total sight deposits for the week ending June 19 came in at CHF680.1bn vs CHF679.5bn the previous week. Swissy was on the decline during first half of the week, therefore there was no need for SNB to react at first, however Swissy started gaining strength in the second part of the week which lead to rise in total sight deposits. 

This week we will have consumption and inflation data. 

Important news for CHF: 

Tuesday:

  • Retail Sales

Thursday:

  • CPI

You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT+3 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.

Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.

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