Forex Weekly Outlook Sep 29-Oct 3

The US dollar had another superb week, crushing its peers. A rate decision in the euro-zone, US Consumer confidence, ISM Manufacturing PMI and of course the all-important NFP report are among the top tier events that await us as we enter a new quarter. These are the major events on Forex calendar. Here is an outlook on the main market-movers ahead.

Markets were hungry for dollars, and found some reasons to do so: new home sales reached the highest in 6 years and showed the economy expanded at an annual rate of 4.6% in the second quarter, better than the 4.2% estimate made a month ago, providing momentum for strong growth the rest of the year. US The euro had its reasons to fall on weaker German business confidence and a reiteration that the ECB is ready to do more. Commodity currencies suffered alongside stock markets and worries about China, and specifically the kiwi was hit by the RBNZ when it was down. Let’s start:

1. Eurozone Inflation data: Tuesday, 9:00. Euro zone inflation edged up 0.4% in August, the same as in July. The main price increase occurred in rents and car-repair. The Euro area remained in the “danger zone” of below 1% for 11 straight moths. The recent rate cuts and asset purchases are expected to stimulate the economy and boost inflation. ECB next step may involve a more massive bond-buying program. Euro zone inflation  is expected to gain 0.3% this time.
2. Canadian GDP: Tuesday, 12:30. The Canadian economy expanded 0.3% on a monthly base in June, following a 0.5% gain in May. The reading was better than the 0.2% expansion anticipated by analysts. The increase was driven by an increase in mining and oil and gas extraction offsetting the fall in the manufacturing sector. On a  yearly base, GDP edged up 3.1% in June the highest growth rate since September 2011. The Central Bank expects that the economy will expand 2.2% in 2014 and 2.4% in 2015. GDP is forecasted to increase by 0.2% in July.
3. US CB Consumer Confidence: Tuesday, 14:00. US consumer confidence picked up in August, reaching 92.4 from a downwardly revised 90.3 the prior month. The reading was higher than the 89.1 reading projected by analysts and posted the fourth straight rise. Better business conditions and strong job growth boosted consumer’s moral. Consumers also forecasted an inflation rise of 5.5% in the coming 12 months. Consumer confidence is expected to reach  92.2 this time.
4. US ADP Non-Farm Employment Change: Wednesday, 12:15. ADP payroll numbers slipped in August to 204,000, from 212,000 in the previous month. However the ADP figures have proved to be volatile, showing only the general trend of the Non-Farm payrolls coming later that week. Economists expected a stronger release of 218,000. Overall, employment figures remained high, posting the fifth straight month of job gains above 200,000. The US job market is expected to expand by 206,000 positions in September.
5. US ISM Manufacturing PMI: Wednesday, 14:00.  U.S. manufacturing activity edged up to its highest level in nearly 3-1/2 years in August, rising to 59, after a 57.1 release in July, amid a strong jump of a 3.4% in consumer spending during July, indicating a growth trend in the US economy. Economists expected a reading of 57 points. Private construction, the largest portion of construction spending, rose 1.4%, its highest level since November 2008. U.S. manufacturing is predicted to reach 58.6.
6. Eurozone rate decision: Thursday, 11:45. The European Central Bank cut its benchmark rate to 0.05% in September from 0.15% in August. ECB President Mario Draghi noted the rate cut reached the lower bound following a downturn trend in the Eurozone economy with low inflation, sinking deeper below the ECB's target of just under 2 %. The ECB also lowered the rate on bank overnight deposits to -0.20%. No change in rates is expected now. In the press conference, Draghi will likely provide more details about the ABS program. Will it indeed be sizable? He will likely refer to the first round of the TLTRO, that didn't go so well.
7. US Unemployment Claims: Thursday, 12:30. The number of people filing initial claims for unemployment benefits increased by 12,000 last week to 293,000, after contracting sharply two weeks ago. However despite the sharp rise, the level of applications remains near pre-recession levels, indicating that hiring remains strong. Over the past year, the four-week average for applications has fallen 7.1%. The total number of people receiving benefits ticked up by 7,000 to 2.4 million. He number of claims is expected to rise to 299,000.
8. US Non-Farm Employment Change and Unemployment rate: Friday, 12:30. The US economy added only 142,000 jobs in August, the lowest figure this year after a 212,000 rise in July. The sharp fall came as a surprise to analysts, expecting a gain of 226,000. However, the unemployment rate declined to 6.1% from 6.2% in the previous month, in line with market forecast. The US had added an average of 212,000 jobs each month over the prior 12 months. While the monthly release was weaker than anticipated, the longer-term trend remains positive. Gains now average 207,000 over the last three months. A gain of 216,000 jobs is expected in the NFP report. It is also important to note the participation rate, which dropped back down to 62.8% last month and to average hourly earnings, which will likely show a rise of 0.2%.
9. US Trade Balance: Friday, 12:30. The U.S. trade deficit narrowed in July to its lowest level since January, reaching to a seasonally adjusted $40.5 billion, from $40.8 billion in June. Exports of automobiles, telecom equipment, industrial machines and semiconductors increased. Imports of oil products increased, but rising domestic production reduced the trade deficit in petroleum to its lowest in more than five years. The decline in trade deficit reinforces views that the US economy continues to strengthen. The U.S. trade deficit is expected to decline further to $41.0 billion in July.
10. US ISM Non-Manufacturing PMI: Friday, 14:00. The U.S. service sector continued to expand in August, reaching 59.6 after gaining 58.7 in July, beating forecast of 57.3. The majority of responders were optimistic regarding business conditions. The business activity index showed a reading of 65, up from July’s reading of 62.4; the new orders index hit 63.8, down from the previous reading of 64.9 and the employment index rose to 57.1, from July’s reading of 56. Overall, the ISM manufacturing and non-manufacturing reports suggest a continued improvement in the U.S. economy. US ISM Non-Manufacturing PMI is forecast to reach 58.5. This publication usually serves as a hint towards the NFP, but in this case it is only published after the event.

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

*All times are GMT.