Review of the main events of the Forex economic calendar for the next trading week (03.10.2022 – 09.10.2022)
Despite a strong decline last Wednesday and Thursday, the dollar ended September on a positive wave, and its DXY index updated another 20-year local high, rising to 114.72. Thus this month became the 4th month of the continuous strengthening of the dollar and the DXY index. Starting from June 2021, the DXY dollar index has been growing almost continuously on a strong bullish momentum laid down by the decisions of the Fed leaders aimed at tightening the monetary policy of the American central bank. At the moment, it remains perhaps the toughest among the world’s largest central banks, and this is a strong fundamental factor contributing to the strengthening of the dollar.
It is possible that as soon as in the first days of the new month we will observe the completion of the downward correction of the dollar, which has been brewing for a long time.
Next week, market participants will study the results of the meetings of the central banks of Australia and New Zealand and important macro statistics from Australia, the Eurozone, Canada, the US, including the report of the US Department of Labor with key data from the US labor market for September. We also note that mainland China and Hong Kong will be celebrating the National Day of the PRC all next week, and therefore trading volumes during the Asian trading session will be lower than usual (Chinese banks and exchanges will be closed).
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, October 3
14:00 USD US Manufacturing PMI (from ISM)
The US Manufacturing PMI published by the Institute for Supply Management (ISM) is an important indicator of the state of the US economy as a whole. A result above 50 is considered positive and strengthens the USD, while one below 50 is considered negative for the US dollar. Forecast: 52.3 in September (against 52.8 in August, 53.0 in June, 56.1 in May, 55.4 in April, 57.1 in March, 58.6 in February, 57.6 in January ). The index is above the level of 50 and, despite the relative decline, has a relatively high value, which is likely to support the dollar. The data above the value of 50 indicate an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast and, especially, below the value of 50, the dollar may sharply weaken in the short term.
Tuesday, October 4
03:30 AUD RBA’s interest rate decision. RBA’s accompanying statement
The main negative factors for the Australian economy are weak wages growth, a weak labor market and a slowdown in growth. However, Australia’s economic recovery is accelerating. The government of the country expects that in the 2022-23 financial year, the country’s economy will grow by +3.5%, the unemployment rate will fall to a low since the early 1970s (in April, unemployment in Australia fell to 3.9%, the lowest since August 2008) and wages will increase by about 3.25%. This, in turn, will allow the Reserve Bank of Australia to continue on the course of monetary policy normalization it launched in May by raising interest rates for the first time since November 2010. To curb inflation, which hit a 20-year high (in Q1 2022, Australian headline annual consumer price inflation was 5.1% and core inflation was 3.7%), the rate was raised by 0.25% to 0.35% and then to 0.85%, 1.85%, 2.35% (in September 2022), which exceeded economists’ forecasts. In addition, the RBA signaled the likelihood of a further increase in the coming months.
“The Board will do everything necessary to ensure that over time, inflation in Australia returned to the target level – said the head of the central bank Philip Lowe. – This will require further interest rate hikes in the future.”
According to the RBA forecast, in 2022 headline inflation will be at the level of 6%, while core inflation will accelerate to 4.75%. At the same time, the unemployment rate next year may fall to 50-year lows.
“With the move towards full employment and data on prices and wages, some scaling back of the emergency monetary support provided during the pandemic is appropriate,” Lowe said.
Economists now expect the RBA to raise its key rate to 2.6% by December 2022 and keep it at that level next year.
Thus, the Australian dollar received an impulse to grow. As you know, under normal economic conditions an increase in the interest rate usually leads to the strengthening of the national currency.
It is possible that at this meeting the Central Bank of Australia will again raise the interest rate, although unexpected decisions are possible, for example, a decrease or a stronger increase in the interest rate.
In the accompanying statement, the RBA officials will explain the reasons behind the rate decision. If the RBA signals the possibility of easing monetary policy in the near future, the risks of the fall of the Australian dollar will increase. And, on the contrary, tough rhetoric of the RBA’s accompanying statement may provoke the strengthening of the Australian dollar.
Wednesday, October 5
01:00 NZD RBNZ’s decision on the interest rate. RBNZ’s accompanying statement
Subdued economic growth (New Zealand GDP growth has slowed since the second half of 2018) and a weakening labor market, as well as an escalation of international trade wars and a worsening global economic outlook have forced the Reserve Bank of New Zealand to keep interest rates low for a long time. An additional and unforeseen risk to the global and New Zealand economies was the coronavirus epidemic.
However, following the results of the meetings held in October and November, the Reserve Bank of New Zealand (for the first time in 7 years) raised the key interest rate to 0.50%, and then to 0.75%. In February and April 2022, the interest rate was raised again to 1.5% to dampen inflation and contain rapidly rising home prices. The current RBNZ interest rate is 3.0%.
Earlier, the RBNZ said that the economy no longer needs the current level of monetary stimulus.
The RBNZ is expected to raise the interest rate again at this meeting, and may also speak in favor of a further increase in the interest rate at the next meetings. Market participants following the NZD quotes need to be prepared for a sharp increase in volatility during this period of time.
In the accompanying statement and comments, the RBNZ management will provide an explanation of the interest rate decision and comments on the economic conditions that contributed to the decision.
At this time, the volatility in the quotes of the New Zealand dollar may rise sharply.
Earlier, the RBNZ said that against the backdrop of “multiple uncertainties”, monetary policy “will remain loose for the foreseeable future” but “may be adjusted accordingly.”
12:15 USD ADP National Employment Report
Usually, the ADP report on the level of employment in the private sector has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. The US private sector employment growth is expected to be +200,000 in September (against 132,000 growth in August, 128,000 in May, 202,000 in April, 249,000 in March, 601,000 in February, 512,000 in January 2022 year, by 807,000 in December, 534,000 in November, 571,000 in October, 568,000 in September, 374,000 in August, 330,000 in July, 692,000 in June, 978,000 in May, 742,000 in April, 517,000 in March, 117,000 in February, 174,000 in January 2021). The relative growth of the indicator may have a positive impact on the dollar quotes, and the relative decline of the indicator will affect it negatively. The market reaction may be negative, and the dollar may decline if the data also turns out to be worse than the forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. Most of the layoffs were concentrated in the tourism and retail sectors. Other important sectors of the economy also suffered. The ADP previously reported that the most significant drop in employment was recently noted in the construction sector and the financial services sector.
Although the ADP report does not have a direct correlation with the US Department of Labor official data on the labor market, which will be published on Friday, the ADP report is often its harbinger, having a noticeable impact on the market.
14:00 USD US Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. These services sectors (unlike the manufacturing sector) have virtually no impact on the country’s GDP.
A result above 50 is seen as positive for the USD. September forecast: 56.0 (against 56.9 in August, 56.7 in July, 55.3 in June, 55.9 in May, 57.1 in April, 58.3 in March, 56.5 in February , 59.9 in January, 62.0 in December), which is likely to have a generally positive impact on the USD. However, a relative decline in the index, and especially below 50, may have a short-term negative impact on the dollar.
Thursday, October 6
00:30 AUD Balance of trade
The indicator evaluates the ratio between exports and imports. The growth of exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. Previous values: AU$8.733 billion (July), AU$17.670 billion (June), AU$15.965 billion (May), AU$10.495 billion (April), AU$9.314 billion (March), AU$7.457 billion dollars (for February), 12.891 billion Australian dollars (for January). A decrease in the trade surplus may have a negative impact on the Australian dollar. Conversely, a growing trade surplus is positive for the AUD. Forecast for August: 10.500 billion Australian dollars.
09:00 EUR Retail sales in the Eurozone
Retail sales is the main indicator of consumer spending showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast for August: -0.4% (-1.7% yoy) against +0.3% (-0.9% yoy) in July, -1.2% (-3.7% yoy) yoy) in June, +0.2% (+0.2% yoy) in May, -1.3% (+3.9% yoy) in April, -0.4% (+0.8% yoy) in March, +0.3% (+5.0% yoy) in February, +0.2% (+7.8% yoy) in January. The data suggests that, despite rising indices, retail sales have not yet reached pre-coronavirus levels after a sharp drop in March-April 2020, when tight quarantine measures were in place in Europe. However, better-than-expected data are likely to have a positive impact on the euro.
15:35 CAD Speech by head of the bank Tiff Macklem
The Canadian economy, as well as the entire global economy, has been slowing down since 2020 (first due to the coronavirus pandemic). Earlier, Tief Macklem said that the country’s economy is quite stable. However, the situation has changed rapidly, and not for the better. It will now be interesting to hear Macklem’s opinion on the stability of the Canadian economy and the central bank’s monetary policy.
If Tief Macklem touches upon the subject of the monetary policy of the Bank of Canada, the volatility in the quotes of the Canadian dollar will increase sharply. The tough tone of his speech will help strengthen the Canadian dollar. The soft rhetoric of Tief Macklem’s speech and the tendency to conduct a loose monetary policy will negatively affect the CAD quotes.
He will probably also explain the Bank of Canada’s recent decision on interest rates and could provide some guidance for investors ahead of the next central bank meeting, likely next month.
Friday, October 7
06:00 EUR Retail sales in Germany
Retail sales is the main indicator of consumer spending in Germany showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Previous values: +1.9% (-2.6% yoy) in July, -1.6% (-8.8% yoy) in June, +0.6% (-3.6% yoy) in May, -5.4% (-0.4% yoy) in April, -0.1% (-2.7% yoy) in March, +0.3% (+ 7.0% YoY) in February, +2.0% (+10.3% YoY) in January 2022.
The data speaks of the instability of the recovery of this sector of the German economy. Data better than the forecast and / or the previous value is likely to have a positive impact on the euro, but only in the short term. Forecast for August: -1.0% (-5.1% in annual terms).
12:30 USD Average hourly wages. Non-farm payrolls. Unemployment rate
These are the most important indicators of the state of the labor market in the US in September. Forecast: +0.3% (against +0.3% in August, +0.5% in July, +0.3% in June, May and April, +0.4% in March, 0% in February, +0.7% in January 2022, +0.6% in December, +0.3% in November, +0.4% in October, +0.6% in September and August 2021) / +0.250 million (against +0.315 in August, +0.528 million in July, +0.372 million in June, +0.390 million in May, +0.428 million in April, +0.431 million, +0.678 million in February, +0.467 million in January 2022, + 0.199 million in December, +0.210 million in November, +0.531 million in October, +0.194 million in September, +0.235 million in August 2021) / 3.7% (against 3.7% in August, 3.5% in July, 3.6% in June, May, April and March, 3.8% in February, 4.0% in January 2022, 3.9% in December, 4.2% in November, 4.6% in October, 4.8% in September, 5.2% in August 2021), respectively.
In general, the figures can be described as encouraging. The data shows continued improvement in the US labor market after its precipitous fall in the first half of 2020. Before the coronavirus, the US labor market remained strong, indicating the stability of the US economy and supporting the dollar quotes.
Predicting the market reaction to the publication of indicators is often difficult, because many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, because the economic situation in the US and many other major economies remains controversial due to the coronavirus. In any case, when the data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the financial market. The most cautious investors might prefer to stay out of the market during this period of time.
12:30 CAD Unemployment rate in Canada
Statistics Canada is to publish data on the country’s labor market for September. Unemployment has risen in Canada in recent months, partly amid massive coronavirus-related business closures and layoffs. Unemployment rose from the usual 5.6% – 5.7% to 7.8% in March and already to 13.7% in May 2020. If unemployment continues to rise, the Canadian dollar will decline. If the data turns out to be better than the previous value, the Canadian dollar will strengthen. Decreasing unemployment rate is a positive factor for the CAD, rising unemployment is a negative factor. In August 2022, unemployment was at 5.4% (against 4.9% in July and June, 5.1% in May, 5.2% in April, 5.3% in March, 5.5% in February , 6.5% in January 2022). Forecast for September 2022: 5.4%.
Price chart of AUDUSD in real time mode
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