Review of the main events of the Forex economic calendar for the next trading week (19.07.2021 – 25.07.2021)
Trading on key Forex news: next week we expect the publication of important macro statistics from Germany, Australia, the US, Eurozone, the UK, Canada, as well as the results of the meetings of the central banks of China and the Eurozone on monetary policy issues.
The dollar continues to strengthen little by little despite the efforts of the head of the Fed Jerome Powell. Speaking in Congress Wednesday and Thursday, he said the central bank will not rush to cut monthly asset purchases and that the economy is “still far” from the Fed’s targets. Nevertheless, Powell acknowledged that inflation is growing faster than expected, and if it goes beyond the acceptable limits, monetary policy will have to be tightened ahead of schedule.
He said that the recent rise in consumer prices has pushed inflation out of the short-term target zone “slightly” above 2%, and this is “a shock to the system …”. “Of course we are not happy with this,” Powell said, noting that Fed officials are closely monitoring inflation expectations to see if they need to reconsider their position.
Worries about how long inflation will last, how it will affect future earnings and the stock market, given the growing likelihood that the Federal Reserve may begin phasing out stimulus policies ahead of schedule, and worries about the spread of the coronavirus worsen investor sentiment and support the US dollar. The DXY dollar index closed last week with a gain of +0.57%, and the potential for its further growth remains. It is increasingly difficult for Fed leaders to contain the strengthening of the dollar against the backdrop of rising inflation, which has shown record growth rates over the past 29 years. Sooner or later, they will have to start curtailing the stimulating policy.
Next week, financial market participants will pay attention to the publication of important macro statistics from Germany, Australia, the US, the Eurozone, the UK, Canada, as well as the results of the meetings of the central banks of China and the Eurozone on monetary policy issues.
*during the coming week, new events may be added to the calendar and / or some scheduled events may be canceled
Monday, July 19
No important macro statistics planned to be released.
Tuesday, July 20
01:30 CNY The People’s Bank of China interest rate decision
Since May 2012, the People’s Bank of China has been steadily cutting interest rates in support of Chinese manufacturers. The last time the bank lowered the rate in April 2020 (by 0.20% to 3.85% at the moment).
In 2020, in the context of international trade conflicts and a slowdown in the global economy, the world’s largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitiveness of goods exported from these countries.
The People’s Bank of China is also in line with this process. The depreciation of the yuan has become especially relevant in the last 2 years, when the confrontation between the two most powerful economies in the world began. One of the measures to mitigate the negative consequences of increased duties on the import of Chinese goods into the United States was the depreciation of the national currency of China. This measure was intended, among other things, to maintain the same volumes of imports of Chinese products to the United States, which would cost American buyers less due to the difference in the rates of the national currencies of the United States and China.
The coronavirus has become an additional strong negative factor.
At this meeting, the People’s Bank of China will probably keep the interest rate at the same level of 3.85%, although a rate cut is also possible.
Nevertheless, if the People’s Bank of China makes unexpected statements or decisions, volatility may increase in the entire financial market. Investors will also be interested in the bank’s assessment of the consequences of the coronavirus for the Chinese economy and its policy in the near future in this regard.
01:30 AUD Minutes of the July meeting of the RB of Australia
This document is published two weeks after the meeting and the decision on the interest rate. If the RBA positively assesses the state of the labor market in the country, the rate of GDP growth, and also shows a hawkish attitude towards the inflation forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The bank’s soft rhetoric regarding above all inflation puts pressure on the AUD.
Market participants believe that the RBA will not raise interest rates until 2024, as promised by central bank officials. Wages continue to rise slowly, and household debt has risen to an all-time high, which also puts higher interest rates in the longer term.
“The economic recovery will be uneven and unstable,” and “unemployment may remain high for a long time,” said the leaders of the RBA after one of the last meetings of the bank, promising that “the rate will not rise until the Central Bank sees progress in moving towards full employment and stable inflation rates in the 2-3% range”.
According to the head of the RBA Philip Lowe, “there are no serious arguments in favor of tightening monetary policy in the short term.” In his opinion, “some time will pass before interest rates are raised.”
Nevertheless, if the published minutes contain unexpected information regarding the issues of the RBA’s monetary policy, the volatility in the AUD quotes will increase.
08:00 EUR Eurozone Bank Lending Study
The study conducted by EU financial experts on the state of the bank lending system is carried out 4 times a year. The main goal of the study is to obtain expanded information on the conditions of bank lending in the Eurozone.
The obtained data are used by the ECB management when making decisions on the bank’s monetary policy. This report may cause increased volatility in the euro quotes and on the European stock market at the time of its publication, if it contains unexpected conclusions regarding the terms of lending to businesses and households in the Eurozone.
23:50 JPY Bank of Japan Monetary Policy Committee meeting
At this meeting, the Bank of Japan’s Monetary Policy Committee will once again summarize the results of last week’s meeting of the Bank, analyze the economic situation in Japan and give indications on possible future prospects for the Bank of Japan’s financial policy.
If the tone of the minutes of the meeting indicates the firmness of the intentions of the Bank of Japan regarding monetary policy in the country, it will negatively affect the Japanese stock market and strengthen the yen. Conversely, a soft rhetoric about the bank’s monetary policy prospects will contribute to the weakening of the yen and the growth of the Japanese stock market.
Wednesday, July 21
01:30 AUD Retail Sales Index
The Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (for May) was +0.4%. If the data turns out to be weaker than the previous value, the AUD may sharply decline in the short term, however if it’s above the previous values, the AUD is likely to strengthen.
Thursday, July 22
Japan celebrates Marine Day. The banks in this country will be closed, due to which the trading volumes during the Asian session will be reduced.
11:45 EUR ECB’s decision on rates
The ECB will publish its decision on the key rate and on the deposit rate. The ECB’s tough stance on inflation and key interest rates contributes to the strengthening of the euro, while a soft stance and rate cuts weaken the euro. In September 2019, the European Central Bank lowered its key interest rate on deposits by 0.1%, to -0.5%, for the first time since March 2016, and began buying bonds worth 20 billion euros a month, renewing the so-called quantitative easing program. According to the ECB leaders, the balance of risks for the economic prospects of the Eurozone “is still shifted to the negative side”, and “until inflation is in line” with the target level, which is just below 2%, the rate will remain low. The new forecasts of the ECB on rates and the QE program can be viewed as a signal of the inclination to further soften policy amid the reluctant inflation to accelerate.
After Brexit, trade conflicts, factors of political instability in Europe, as well as the growing coronavirus pandemic, due to which European countries are forced to introduce new quarantine restrictions that negatively affect economic activity, are the main threats to the European economy. Back in March 2020, the ECB signaled the possibility of policy easing, and the bank’s representative admitted that the bank’s management could lower the already negative interest rates even more.
Probably, following the results of this ECB meeting, the key interest rate will remain at the same level of 0%. The ECB’s rate on deposits for commercial banks is also likely to remain at -0.5%. At the same time, there is a possibility that at this meeting the ECB will announce a new program to stimulate the economy, which will put pressure on the euro.
12:30 EUR Press conference of the ECB
The press conference will be of primary interest to market participants. During its course, a surge in volatility is possible not only in the euro quotes, but also in the entire financial market, if the ECB leaders make unexpected statements. The ECB leaders will assess the current economic situation in the Eurozone and comment on the ECB’s rate decision. In previous years, based on the results of some ECB meetings and subsequent press conferences, the euro exchange rate changed by 3-5% in a short time.
A soft tone of the statements will have a negative impact on the euro. Conversely, a tough tone from ECB officials on central bank monetary policy will strengthen the euro.
Friday, July 23
Japan celebrates Health and Sports Day. The banks in this country will be closed, due to which the trading volumes during the Asian session will be reduced.
07:30 EUR Germany’s Manufacturing PMI by Markit Economics (preliminary release). Composite PMI by Markit Economics (preliminary release)
Germany’s Manufacturing PMI is an important indicator of the business environment and the overall health of the German economy. This sector of the economy forms a significant part of Germany’s GDP. A result above 50 is seen as positive and strengthens the EUR, one below 50 as negative for the euro. Forecast for July (preliminary release): 64.1.
Previous monthly values: 65.1, 64.4, 66.2, 66.6, 60.7, 57.1, 58.3, 57.8, indicating that business activity in this sector of the German economy has accelerated after its slowdown in 2020 due to the coronavirus pandemic. The growth of the indicator above the previous values will support the euro (in the short term). The data worse than the forecast will have a negative impact on the euro.
Composite PMI is an important indicator of the business environment and the overall health of the German economy. A result above 50 is seen as positive and strengthens the EUR, one below 50 as negative for the euro. Forecast for July (preliminary release): 61.0 against 60.1, 56.2, 55.8, 57.3, 51.1, 50.8, 52.0, 51.7 in previous months. The publication of this indicator with the specified expected value is likely to support the euro in the short term. The data worse than the forecast and below the value of 50.0 will have a negative impact on the euro.
08:00 EUR Composite Manufacturing PMI by Markit Economics (preliminary release)
Eurozone Manufacturing PMI is an important indicator of the health of the entire European economy. A result above 50 is seen as positive and strengthens the EUR, one below 50 as negative for the euro. Forecast for July (preliminary release): 60.0 against 59.5, 57.1, 53.8, 53.2, 62.5, 48.8, 47.8, 49.1, 45.3 in previous months , which is likely to have a positive effect on the euro. If the data turns out to be worse than forecast, the euro may fall sharply in the short term.
08:30 GBP UK’s Services PMI by Markit Economics (preliminary release)
The UK’s Services PMI is an important indicator of the health of the UK economy. The services sector employs most of the UK’s working-age population and accounts for approximately 75% of GDP. Financial services continue to be the most important part of the service industry. If the data turns out to be worse than the forecast and the previous value, the pound is likely to drop sharply in the short term. The data better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is seen as positive and strengthens the GBP, one below 50 – as negative for the GBP.
Previous values of the indicator: 62.4 in June, 62.9 in May, 61.0 in April, 56.3 in March, 49.5 in February, 39.5 in January 2021 after falling to 29.0 levels in May , 13.4 in April, 34.5 in March 2020. Preliminary forecast for July: 62.0.
12:30 CAD Retail Sales Index
Retail Sales Index is published monthly by Statistics Canada and estimates total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the CAD; a decrease in the indicator will negatively affect the CAD. The previous value of the index (for April) was -5.7% after falling in March 2020 by -9.9%, in April – by -25% and growing in May by +18.7%. If the data for May turns out to be even weaker than the forecast of -5.0%, the CAD may sharply decline in the short term.
Price chart of EURUSD in real time mode
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