Forex Weekly Outlook – August 22-26

The US dollar was on the back foot, suffering losses of various degrees across the board. The upcoming week features US durable goods orders, updated GDP reads from the UK and the US as well as the Jackson Hole Symposium. Here is a guide to the key events of the upcoming week.

Some Fed members want a rate hike soon, but despite being relatively vocal, they are a small minority, as the meeting minutes revealed. While most data was OK, the impact of the poor retail sales from the previous week and the dovish Fed weighed on the greenback. In the UK, post-Brexit data was positive, helping the sterling recover. The euro also enjoyed this, and the yen continued battling the 100 line. The Canadian dollar led the pack of commodity currencies as oil prices continued their positive grind. Let’s start:

1. US New Home Sales: Tuesday, 14:00. Sales of new home trigger wider economic activity such as infrastructure expenditure and this indicator serves as a gauge to the wider economy. In June, the annualized level of sales reached 592K. A drop to 575K is on the cards.
2. Existing Home Sales: Wednesday, 14:00. Most of home sales are of existing, second-hand homes. While these trigger less economic activity in comparison to new home sales, this publication also moves markets. The figure reached 5.57 million (annualized) in June. A similar figure of 5.55 million is projected.
3. Crude Oil Inventories: Wednesday, 14:30. This weekly report moves oil prices and also impacts the wider markets. The latest report showed a draw of 2.5 million barrels in inventories, and this helped boost oil prices.
4. German Ifo Business Climate: Thursday, 8:00. The No. 1 Think-tank in the No. 1 economy releases its monthly business gauge of the economy. In July, they showed solid business sentiment despite Brexit, with a score of 108.3 points. It contrasted the negative number from ZEW. With a bounce in the ZEW indicator, we could also see this IFO following up with 108.5 points.
5. Durable goods orders: Thursday, 12:30. Sales of durable goods reflect longer-term investments and contribute to GDP. While the headline figures may be distorted by aircraft or defense orders, the core figure provides a better measure. Headline orders are predicted to rise by 3.5% after a slump of 3.9%. Core figures are also expected to bounce: a rise of 0.4% after a slide of the same scale beforehand.
6. UK GDP: Friday, 8:30. This is the second release for Q2, pre-Brexit. The strong growth in the Spring is expected to be confirmed in the second read. The bigger speculation is about the third quarter, post-Brexit.
7. US GDP: Friday, 12:30. The first release of Q2 2016 GDP was very disappointing. The economy grew by a mere 1.2% annualized in that quarter, much worse than expected. It is the third consecutive quarter of sub 2% growth, and no material change is expected now: a downgrade to 1.1% is predicted. Note that the market impact is not as strong as the first release.
8. Janet Yellen talks: Friday, in the European afternoon. Central bankers gather Jackson Hole Wyoming in the annual Symposium organized by the Kansas City Fed. In the past, former Fed Chair Ben Bernanke used the event to set out plans for future monetary policy.. Current Chair Yellen has skipped opportunities to provide bold statements and even skipped the event in the past. It is unclear whether she will provide big market hints and also the exact time of the speech is unknown. Nevertheless, markets will follow her words following the cautious meeting minutes.