Forex Weekly Outlook August 19-23

Currencies provided quite a few volatile moments in the normally quiet midsummer weeks, but there was no clear direction and the QE tapering remains open. US housing data, the FOMC Meeting Minutes and Unemployment Claims are the highlights of this week. Here are the main market-movers on our calendar.

Weekly jobless claims reached a new multi year low of 320K, beating market predictions. The big fall indicates increased hiring in early August. Also solid inflation numbers support a “Septaper”. However, not all figures were great and the greenback didn't always react as expected. On the other side of the Atlantic, the pound received more excellent news and the euro-zone exited its recession, even though doubts remain. Let’s start.

  1. US Existing Home Sales: Wednesday, 14:00. Previously owned home sales unexpectedly declined 1.2% to 5.08 million units in June, following two straight months of sharp increases, Economists expected the number to reach 5.27 million. However the surge in house prices indicates the market recovery remained on course. A rise to 5.51 million is expected this time.
  2.  US FOMC Meeting Minutes: Wednesday, 18:00. In the recent meeting, the FOMC left policy unchanged and made very minor changes to the statement, mostly in inflation. As economic data isn’t that different than at the time of the meeting, getting a peek into the internal discussions will certainly shed light on markets and will likely have a strong impact on markets.
  3. Chinese HSBC Manufacturing PMI: Thursday, 1:45. This independent survey is considered one of the best indicators for the world’s No. 2 economy. The recent figure was quite worrying: a drop to 47.7, which reflects not-so-mild contraction. A small recovery to 48.3 is expected. This has implications on the Australian dollar and the Japanese yen, as well as other currencies.
  4. US Unemployment Claims: Thursday, 12:30. US jobless claims fell nicely to 320K, following  335K in the previous week. This data was 14K lower than predicted by analysts, indicating the job market recovery is picking up. The four-week moving average for new claims, , fell 4,000 to 332,000, the lowest level since November 2007.  A small increase to 322,000 is projected.
  5. UK GDP (second release): Friday, 8:30. The first release of GDP for Q2 showed strong growth of 0.6%, and since then almost all British economic indicators shined. This figure is expected to be confirmed now, giving a boost to GBP, especially as Carney’s forward guidance is already out, and doesn’t scare the markets too much.
  6. Canadian inflation data: Friday, 12:30. Consumer prices were a little weaker than expected in June. CPI remained unchanged following the 0.2% gain in May. However the annual inflation increased 0.5% to 1.2%. Meanwhile core CPI excluding food and energy, declined 0.2% in June after a 0.2% increase in the previous month. Inflation in Canada is subdued for a period of fourteen months, situated below the 2.0% BOC target.  CPI is expected to rise 0.2% while core CPi is predicted to climb  0.1% .
  7.  US New Home Sales: Friday, 14:00. The annualized number of new home sales in the US soared in June to a five-year high of 497,000 units, following 459,000 in the preceding month. Together with other encouraging data from the industrial sectors, hopes are up for a third-quarter pick-up in economic growth. The recent climb in mortgage rates had no effect on rising demand. A small decline to 492,000 is expected.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

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