The summer doldrums should be over next week as major data releases breathe some life into the forex markets. The United States will by far have the busiest economic calendar as the Fed gets its hands on the last jobs report and PCE inflation figures before the September FOMC meeting. Outside of the US, manufacturing PMIs will be the main focus, while Japan will also have a relatively packed data release schedule.
Australian data to be eyed ahead of Q2 GDP release
The Australian dollar has been consolidating for the past month after hitting a more than two-year peak as a combination of risk aversion and exchange rate warnings by RBA officials have weighed on the currency. Rising metal prices have limited its losses though and data due next week may refuel the stalled rally. Second quarter figures on capital expenditure out on Thursday will be watched carefully as it will be a good indication to the GDP growth figures for the same period due the following week. Also to watch out of Australia next week are July building approvals on Wednesday and private sector credit (July) and the AIG manufacturing index (August) on Thursday.
Canada likely enjoyed another quarter of strong growth
After growing by a solid 3.7% annualized rate in the first quarter, economists are forecasting Canada’s economy to expand by about 3.5% in the three months to June. Such a figure (due on Thursday) could be enough to warrant a second rate hike by the Bank of Canada in the autumn, following its decision in July to raise rates by 25 basis points. It could also lift the Canadian dollar to fresh two-year highs. The loonie has already seen strong bullish sentiment this week, rising to three-week highs against a subdued greenback.
Eurozone flash inflation to be watched as ECB meeting nears
As speculation builds about whether the European Central Bank will make an announcement on winding down its asset purchases at its September 6-7 policy meeting, next week’s flash CPI estimates could provide some clues as to the ECB’s next move. Eurozone inflation is forecast to edge up from 1.3% to 1.4% year-on-year in August’s preliminary reading. However, the core rate is expected to ease by 0.1 to 1.2%. A bigger concern for ECB policymakers at the moment however, might be the euro’s rapid rise, particularly against the US dollar, which it has gained 12% in the year to date.
Other Eurozone data next week will include the economic sentiment index for August on Wednesday, the bloc’s July unemployment rate on Thursday and the final reading of the August manufacturing PMI on Friday.
Japanese household spending forecast to ease in July
After expanding for the first time in 16 months on an annual basis in June, household spending in Japan is expected to fall back slightly but remain positive. Household spending, out on Monday, is forecast to moderate from 2.3% to 0.7% y/y in July, with annual retail sales on Tuesday also expected to ease. The preliminary industrial output figures for July are due on Wednesday and are forecast to show a monthly contraction of 0.5% after a 2.2% gain in the prior month. Rounding up the week on Friday is the Nikkei manufacturing PMI.
Japan was the fastest growing economy in the G7 during the second quarter but the strengthening recovery has yet to generate significant wage and price pressures, leaving the Bank of Japan to trail other central banks in moving towards tighter monetary policy. The yen therefore is unlikely to see much reaction to next week’s data.
More manufacturing PMIs to watch
Other notable manufacturing PMI releases next week will include those out of China and the UK. China will see manufacturing PMI figures from both the National Bureau of Statistics (Thursday) and Caixin/IHS Markit (Friday), as well as the non-manufacturing PMI (also on Thursday).
Meanwhile in the UK, the Markit/CIPS manufacturing PMI, due on Friday, is expected to post a marginal decline to 55.0 in August. The rest of the week will be exceptionally quiet for the UK however, as the London market will be closed for a Bank Holiday on Monday, with no other major data releases scheduled.
Nonfarm payrolls and PCE inflation in focus
US data will once again grab the most attention next week, with the highlight likely to come from the August jobs report. Before then, a flurry of releases should keep traders busy, starting with the Conference Board’s consumer confidence index on Tuesday. The index is expected to fall slightly to 120 in August from 121.1 in July when it hit a 16-year high. Actual consumer spending hasn’t been as strong as some of the surveys have been indicating, nevertheless it did rebound in the second quarter, helping GDP growth to pick up. The second estimate of GDP growth is due on Wednesday and the annualized quarterly rate is forecast to be revised up from 2.6% to 2.7%.
On Thursday, the latest monthly personal consumption expenditure (PCE) figures will be watched closely both by the Fed and by investors. Personal income is expected to rise by 0.3% month-on-month in July after flat growth in the prior period. Personal consumption is also forecast to improve, expanding by 0.3% m/m. The core PCE price index, which is the Fed’s preferred measure of inflation, is expected to increase by 0.1% m/m in July. The annual rate weakened from a peak of 1.8% in January/February to 1.5% during April-June. An acceleration in July that would take it closer to the Fed’s 2% target could help revive expectations of one more rate hike later this year.
A bigger risk event for the dollar will come on Friday with the August nonfarm payrolls numbers. July’s unexpectedly strong report was unable to provide the dollar with a sustained boost, with markets still not convinced that a strong labour market alone will be enough to push the Fed to raise rates again this year, especially when wage growth remains muted. The US economy is expected to add 185k jobs in August, with the unemployment rate holding steady at 4.3%. Average earnings are forecast to rise by 0.3% m/m in August, the same rate as in July. Also important on Friday is the ISM manufacturing PMI. The index is forecast to dip slightly to 56.2 in August.
