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Forex Major Currencies Outlook (Aug 23 – Aug 27)

Jackson Hole Symposium will be the focal point of the week that will include preliminary PMIs from the EU and the UK as well as PCE inflation data from the US.


Retail sales in July heavily missed expectations and came at -1.1% m/m vs -0.2% m/m as expected. Previous month’s reading was revised up to 0.7% m/m from 0.6% m/m but it is not enough to take away the sting of this month’s big miss. Plunging car sales coupled with generally lower propensity by consumers to spend due to worsening of Covid situation, as shown by drops in clothing and non-store retailers, led to retail sales dropping at the start of Q3. Control group, the one used for GDP calculation, dropped -1% m/m vs 1.1 m/m the previous month indicating a very troubling start of Q3. Questions about the health of consumer will arise after the reading and they could remove any potential of QE tapering at Jackson Hole symposium next week. Alternative explanation is that after economy reopened there are more chances for people to spend money on services, which are not encompassed in the retail sales report, and that could mean that consumer is still going strong. 

This week we will have durable goods for July, the best investment indicator, showing us how Q3 started, second estimate of the GDP as well as PCE inflation data. Jackson Hole Symposium will take place on Thursday and Friday with Powell to speak on Friday August 27 at 14:00 GMT. We expect further hints about the taper to come with formal tapering being announced at September meeting. 

Important news for USD: 


  • Durable Goods Orders


  • GDP


  • PCE
  • Jackson Hole Symposium 


Second reading of GDP came unchanged at 2% q/q while year over year figure was lowered to 13.6% from 13.7% as preliminary reported. Final inflation reading for July also came in unchanged at 2.2% y/y for the headline reading and 0.7% y/y for the core reading. Headline is little above the ECBs 2% target, however with core reading so subdued there are concerns about missing price pressures. Difference between price pressures in the US and the EU is stark. EURUSD has dropped below the 1.17 level on the back of rising USD. 

This week we will have preliminary PMI and consumer confidence data for August. 

Important news for EUR: 


  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • Consumer Confidence 


July employment report saw employment change coming in at 95k and the unemployment rate ticking down to 4.7% from 4.8% in June. Wages rose impressive 8.8% 3m/3m but ONS notes that: “annual growth in average employee pay is being affected by temporary factors that have inflated the increase in the headline growth rate.” Additionally, furlough scheme, which is set to expire at the end of September, is still distorting the numbers making it difficult for proper interpretation. 

Headline inflation came in at 2% y/y vs 2.2% y/y as expected with core reading coming in at 1.8% y/y vs 2% y/y as expected. Both readings were down from June (2.5% and 2.3% respectively) indicating a possible turn of the tide in inflation, although it is too early to tell. Clothing, footwear and recreational goods all came lower and were biggest drags while rising prices of transport pushed inflation higher. Rising Delta cases and prolonged supply chain disruptions will keep price pressures up. Retail sales in July dropped considerably and came in at -2.5% m/m vs 0.4% m/m as expected. Ex-autos, fuel category also declined, coming in at -2.4% m/m vs 0.3% m/m as expected. According to ONS non-food stores fell by 4.4%. The drop shows that the UK is having a rough start of the Q3, however it can also be contributed to bigger spending on services rather than goods. 

This week we will have preliminary PMI data for August. 

Important news for GBP: 


  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI 


RBA minutes from August meeting showed members noting that recent resurgence in covid cases interrupted the recovery, adding that health outcomes will present the main source of uncertainty for the economic outlook. Lifting of restrictions is expected to yield positive results in the labour market while underlying inflation conditions will likely remain subdued in the near term and then gradually increase to 2.5% by the end of 2023. Tapering will continue as planned and will be reviewed accordingly in the coming months. 

Employment report for July showed employment change at 2.2k vs -46.4k as expected. A big beat was also achieved in the unemployment rate which dropped to 4.6% from 4.9% in June. The unemployment rate is now at the lowest level since 2009. On the negative side, the participation rate fell to 66% from 66.2% in June. Additionally, jobs created were part-time (6.4k) while full-time jobs fell (-4.2k). Overall, there are things to like about the report, however, with the reintroduction of lockdown in several states across the country we can see the labour market suffering in August. 

Chinese data showed a continuation of weak and falling data with industrial production coming in at 6.4% y/y which is the lowest reading since the start of the millennium. This is also the fifth consecutive month of falling industrial production. Automobile manufacturing showed the biggest drop due to the semiconductor chip shortages. Retail sales came in at 8.5% y/y vs 11.5% y/y for a huge miss, fourth consecutive month of drops. Clothing and smartphone sales were hit the hardest as China is fighting floods and reimposed covid restrictions. The weakness seen in the July report will continue into the August reading as well. 


New Zealand experienced a first case of covid since February of this year. Government reacted promptly and put the country under a three-day lockdown. Newly imposed restrictions weighed on RBNZ decision and they left official cash rate (OCR) unchanged at 0.25%. Markets were pricing almost certain rate hike to 0.50% before the virus resurgence. The statement showed that “Recent data for the New Zealand economy suggest demand is robust and the economic recovery has broadened.” They now see OCR at 0.59% in December vs 0.25% previously and at 1.38% in September of 2022 vs 0.49% previously. Governor Orr stated that RBNZ is confident that less monetary stimulus is needed to support the economy adding that according to their estimates New Zealand is six months ahead of other economies on reopening. NZDUSD proved very resilient after the rate announcement, which contained hawkish elements, as it did drop on the news but quickly rebounded to recover all of the loses. Chances of a rate hike in October have dropped below 50%, however December hike is still in play and it keeps NZD supported. Additionally, GDT auction broke the row of eighth consecutive negative auctions with prices rising 0.3% adding to the bulk of positive data from New Zealand. 

This week we will have retail sales data for Q2. 

Important news for NZD: 


  • Retail Sales 


After a brief pause in June inflation in Canada continued on its way up. Headline number came in at 3.7% y/y vs 3.1% y/y in June. Out of core measures median and trim rose to 2.6% y/y and 3.1% y/y respectively while common measure stayed unchanged at 1.7% y/y. Apart from the June reading prices have been increasing during every month of the year. BOC has already started to reduce bond purchases and after this month’s reading we can expect it to stay on course. Retail sales in June rebounded to 4.2% m/m after dropping -2% m/m in May, but estimates for July reading show a drop of -1.7% m/m. A combination of falling oil prices on the back of concerns about global recovery amidst rising Delta variant cases and rising USD after the FOMC meetings showed members in favor of tapering before the year end led to USDCAD losing over 400 pips in a week. 


Japanese economy managed to avoid a technical recession, two consecutive quarters of negative GDP reading, with Q2 GDP coming in at 0.3% q/q. Private consumption rebounded to 0.8% q/q from -1.5% q/q in Q1 with business investment also rebounding to 1.7% q/q from -1.2% q/q in the previous quarter. Net exports negatively impacted GDP reading for the second quarter in a row indicating that external demand is still not enough to cover the imports of energies and raw materials. Covid restrictions in the form of states of emergencies have curbed the Q2 growth and will continue to push down private consumption in the Q3. 

Headline inflation for July came in at -0.3% y/y but the biggest news was that last month’s reading has been revised down to -0.5% y/y from 0.2% y/y as previously reported. After the revision, which was done as a part of technical adjustment, inflation has been dropping for the 12 consecutive months with August of 2020 representing the last positive reading (0.2%). Japanese government is extended state of emergency until September 12 and added 7 new prefectures to it. 


SNB total sight deposits for the week ending August 13 came in at CHF714.6bn vs CHF713.2bn the previous week. This is the second consecutive week of rising deposits indicating SNBs activity in the markets and push toward the 1.08 level on the EURCHF pair.

You can follow all economic events on the Economic Calendar page on our Website. MT server time is set to GMT+3 and if you need assistance converting MT 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 our accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.

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