Forex Weekly Outlook: Investors eye UK GDP, eurozone inflation

The US dollar enjoyed strong gains against the major currencies last week. Will the greenback’s rally continue? Inflation and GDP releases are this week’s highlights.

Bank of England Governor Bailey was forced to do some damage control last week, as he insisted that the BoE was not considering adopting negative interest rates. His denial came after the BoE policy statement stated that MPC members had been briefed on the possibility of negative rates. The pound briefly lost ground after that announcement and Bailey was forced to make a U-turn on negative rates.

Eurozone and German Manufacturing PMIs improved in September, with readings of 53.7 and 53.6, respectively. The neutral 50-level separates contraction from expansion.

1. German Prelim CPI: Tuesday, All Day. Inflation remains weak in the eurozone’s number one economy, with CPI registering two straight declines. The estimate for September stands at a flat 0.0%.
2. UK GDP: Wednesday, 6:00. The second quarter was a disaster, as Covid-19 shut down much of the economy. The final GDP reading is projected to confirm the initial reading of -20.4%. As this reading has been priced in, the release is unlikely to have much impact on the pound.
3. Canada GDP: Wednesday, 12:30. Canada releases GDP on a monthly basis. The economy has improved, with GDP climbing to 6.5% in June, up from 4.5% in May. The estimate for July stands at 2.9%.
4. Eurozone Unemployment Rate: Thursday, 9:00. The bloc’s unemployment rate has been steadily increasing and reached 7.9% in August. The upward trend is expected to continue in September, with an estimate of 8.1%.
5. Eurozone Inflation: Friday, 9:00. The specter of deflation remains a headache for ECB policymakers. The headline reading came in at -0.2% in August and is projected at -0.1% in September. Core CPI came in at 0.4% in August and the forecast stands at 0.5% for September.

All times are GMT