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Forex Major Currencies Outlook (July 20 – July 24)

Preliminary July PMI data from Europe, UK and Japan as well as consumption data from UK and Canada will be eyed in an otherwise uneventful week.


June CPI improved to 0.6% y/y as expected from 0.1% y/y in May on the back of rising gasoline and food prices. Energy prices rose 5.1% for the largest single-month increase in more than a decade. Core CPI remained at the 1.2% y/y level. Real average weekly earnings dropped to 4.6% y/y while real average hourly earnings dropped to 4.3% y/y. The numbers are still high due to government support packages that will run out on July 31.

Retail sales came in at 7.5% m/m vs 5% m/m as expected. Core retail sales came in at 5.6% m/m vs 3.6% m/m as expected while ex autos category came in at 7.3% m/m. There were beatings all around sending positive signals but there are still caveats. The structure of yearly changes shows double digit drops for food services and drinking places, clothing stores as well as electronics & appliances stores. Those are traditional brick and mortar businesses that were hit particularly hard by the virus and subsequent lockdown measures. An additional caveat is that weekly employment checks of $600 are still handed giving people more purchasing power. The big question is how consumption will react after the CARES act is terminated on July 31.

This week we will have housing and jobless claims data.

Important news for USD:


  • Existing Home Sales


  • Initial Jobless Claims


  • New Home Sales


Industrial production in May came in at 12.4% m/m vs 15% m/m as expected while previous month’s reading was revised down to -18.2% m/m. Lower than expected rebound will be predominant in June as well and a potential recovery will be shown only in Q3 numbers. ZEW survey of the current situation in Germany came in at -80.9 an improvement from -83.1 the previous month but far cry from the expected reading of -65. German expectations reading dropped to 59.3 after 3 months of rising. Slower than expected recovery combined with declining expectations, not a good recipe for the economy.

ECB has left rates unchanged as widely expected and reiterated their willingness to adjust all of their instruments. Interest rates will remain at present or lower levels until the inflation outlook robustly converges to a level sufficiently close to below 2%. PEPP program is kept at €1.350bn and will run at least through end of June 2021. ECB president Lagarde stated that incoming data are signalling resumption of economic activity. Signs are pointing of bottoming in April but outlook remains highly uncertain. Inflation is dampened by energy prices and they expect for it to pick up in early 2021. Lagarde added that the ECB “slowed down a little bit” the pace of PEPP purchases due because markets have stabilized. If the tapering continues there will be enough funds to last through the end of June 2021 without the need for increase in the program.

This week we will have preliminary July PMI data.

Important news for EUR:


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


Monthly GDP for May came in at 1.8% m/m vs 5.5% m/m indicating a very slow recovery from the abysmal -20.3% m/m reading in April. GDP has fallen -19.1% in the previous 3-month period. During May there were still lockdown measures in place, so it stifled the rebound. Industrial and construction output came below expectations while manufacturing production showed better than expected improvement. Yields on 2-year UK gilts slipped below Japanese 2-year yields indicating growing pessimism among bond traders with respect to UK growth prospects.

Jobless claims in June rebounded and came in at -28.1k vs upwardly revised 566.4k the previous month. Claimant count rate slipped to 7.3% from downwardly revised 7.4% the previous month. The unemployment rate for May remained at 3.9% with employment change for the same month coming in at -126k, more than double the expected of -275k. Earnings numbers present a problem with average weekly earnings dropping into negative at -0.3% 3m/y. The Overall employment picture is tainted by the government’s furlough program and cannot be easily interpreted. Inflation in June picked up to 0.6% y/y from 0.5% y/y in May while core CPI came in at 1.4% y/y vs 1.2% y/y in May. BOE Governor Bailey informed MPs that interest rates will remain depressed for at least two more years.

This week we will have consumption and preliminary July PMI data.

Important news for GBP:


  • Retail Sales
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI


Employment change in June came in at 210.8k vs 100k as expected, more than doubling expectations for a hefty beat. The unemployment rate rose to 7.4% from 7.1% the previous month on the back of participation rate rising to 64% from 62.9% in May. Full-time employment change came in at -38.1k while part time employment change came in at 249k. The headline number looks impressive but great concern is that all of those jobs and more were part-time.

Trade balance data from China showed a decrease in the surplus to CNY328.94bn due to imports (6.2%) rising faster than the exports (4.3%). In dollar terms trade balance came in at $46.42bn with imports coming in at 2.7% while exports rose by only 0.5%. The rise in imports indicates that Chinese domestic demand is picking up with energy imports rising the most.

Q2 GDP came in at 11.5% q/q vs 9.6% q/q as expected and 3.2% y/y. This is a complete turnaround from -9.8% q/q in virus stricken Q1. Industrial production in June improved to 4.8% y/y as expected while retail sales again missed the expectations coming in at -1.8% y/y. Chinese monetary policy will continue supporting both production and consumption but with consumption still not having a positive month it is very concerning for the goods exporting countries and the world as a  whole. On the positive side 10 out of 16 sectors that go into retail sales calculation expanded.

This week we will have minutes from the latest RBA meeting as well as speech by Governor Lowe.

Important news for AUD:


  • RBA Meeting Minutes
  • RBA Governor Lowe Speech


Inflation data for Q2 came in at -0.5% q/q vs -0.6% q/q as expected and down from 0.8% q/q in Q1.  When calculated y/y it came 1.5% vs 1.3% as expected and down from 2.5% in the previous quarter. Kiwi was not impacted by the data in the market and NZDUSD continued to hover around 0.66 level on positive risk sentiment.


BOC has left the rate unchanged at 0.25% with a commitment to keep rates at that level until inflation target is hit. BOC will continue CAD5bn per week in QE “until the recovery is well underway”. Economic decline has been characterised as "considerably less severe than the worst scenarios presented in the April MPR". Governor Macklem stated that rates will be on hold for at least 2 years.

This week we will have consumption and inflation data.

Important news for CAD:


  • Retail Sales


  • CPI


BOJ refrained from changing their monetary policy at their July meeting. Interest rate was kept at -0.10%. Board members reiterated their willingness to take additional easing measures, with eye on impact of pandemic on economy. They expect the economy to improve gradually in H2 but the pace of  recovery will be moderate. Governor Kuroda stated at the press conference that economic activity has gradually resumed but that economy remains in an extremely severe situation.

This week we will have trade balance, inflation and preliminary July PMI data.

Important news for JPY:


  • Trade Balance


  • CPI


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


Total sight deposits for the week ending July 10 came in at CHF688.6bn vs CHF687bn the previous week. There was a slight increase in the deposits just enough for SNB to nudge Swissy in desired direction, away from the 1.05 level on EURCHF.

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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