Last Wednesday, after the release of minutes from the June Federal Reserve meeting, the DXY dollar index broke through 107.00, and on Friday, DXY futures reached a new almost 20-year high of 107.61, while maintaining the potential for further growth. Thus, this week has become perhaps the most successful for the DXY dollar index in the last few months, at least since April 2020.
The U.S. nonfarm payroll rose by 372,000 in June, beating an increase of 268,000, while unemployment remained at a pre-pandemic low of 3.6% in June, according to the U.S. Department of Labor's monthly report released on Friday. The dollar reacted by rising quotes to this release, which indicated the stability of the US labor market, and the DXY dollar index again broke through the 107.00 mark.
The dollar ended the first full trading week of the month, quarter, half year on a positive note, with another increase of more than 2.5%, and market participants are waiting for further strengthening of the dollar and the growth of its DXY index, given the Fed's monetary policy, the most stringent (at current) compared to other major global central banks.
Although the first half of the next trading week will not be accompanied by the release of important macro statistics, its second half promises to be no less interesting and volatile than the previous week, with a lot of trading opportunities. Market participants will be focused on next week's release of important macroeconomic statistics for Germany, the United States, Australia, China, as well as the results of meetings of the central banks of New Zealand and Canada, dedicated to monetary policy issues.
As always, a number of important macroeconomic data and a number of important news are expected to be published during the new trading week. It is also worth noting that changes may be made to the economic calendar during the coming week.
Monday, July 11th
The release of important macro statistics is not planned.
Tuesday, July 12
The release of important macro statistics is not planned, but it is worth paying attention to the speech of Bank of England Governor Andrew Bailey.
As the head of the central bank, Bailey has more influence on the dynamics of the British pound than any other person from the UK government. Market participants will closely follow the progress of his speech in order to better understand the prospects for the monetary policy of the BoE.
Volatility during Bailey's speech usually rises sharply in the quotes of the pound and the FTSE London Stock Exchange index, if he gives any hints of tightening or easing of the monetary policy of the BoE.
If Bailey does not touch on the topic of monetary policy, then the market reaction to his speech will be weak.
The level of influence on the markets is from low to high.
Wednesday, July 13
New Zealand. The decision of the Reserve Bank of New Zealand on the interest rate. RBNZ Accompanying Statement
The level of interest rates is the most important factor in assessing the value of a currency. Investors look at most other economic indicators only to predict how rates will change in the future.
Following the meetings held in October and November, the RBNZ (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 ease inflation and curb rapidly rising house prices. At the moment, the RBNZ interest rate is 2.0%. Earlier, the RBNZ stated that the economy no longer needs the current level of monetary stimulus.
It is expected that the RBNZ will raise the interest rate again at this meeting, and may also speak in favor of further interest rate increases at the next meetings.
In the accompanying statement and comments, the RBNZ management will give an explanation about the interest rate decision and comments on the economic conditions that contributed to the adoption of this decision. This is one of the main tools that the RBNZ uses to communicate with investors on monetary policy issues. Most importantly, it discusses economic prospects and offers hints about the results of future decisions.
During the release of the RBNZ's decision on rates and the accompanying statement, the volatility in the quotes of the New Zealand dollar may sharply increase. Earlier, the RBNZ stated that amid "many uncertainties," monetary policy "will remain soft in the foreseeable future," but "may be adjusted accordingly."If the RBNZ signals a tendency to wait and see in the accompanying statement, then the New Zealand dollar is likely to be under pressure. However, the market reaction to the RBNZ's decisions regarding the interest rate in the current situation may be completely unpredictable.
The level of influence on the markets is high.
USA. Basic consumer price index (excluding food and energy products)
Consumer prices account for most of the overall inflation. Rising prices force the central bank to raise interest rates to contain inflation, and, conversely, when inflation decreases or signs of deflation (this is when the purchasing power of money increases and the prices of goods and services fall), the central bank usually seeks to devalue the national currency by lowering interest rates to increase aggregate demand.
This indicator (Core Consumer Price Index, Core CPI) is a key indicator for assessing inflation and changes in consumer preferences. Food and energy are excluded from this indicator to obtain a more accurate estimate (prices for this category of goods account for about a quarter of the consumer price index. They tend to be very volatile and distort the underlying trend. The FOMC usually pays more attention to the underlying data).
A high result is a bullish factor for USD, a low result is a bearish one.
Previous values: +0.6% (+6.0% YoY) in May, +0.6% (+6.2% YoY) in April, +0.3% (+6.5% YoY) in March.
Forecast for June: +0.5% and +5.9% (in annual terms). The data is better than the forecast and the previous values should have a positive impact on the USD.
The level of influence on the markets is high.
Canada. The Bank of Canada's interest rate decision. Bank of Canada's Accompanying statement
The level of interest rates is the most important factor in assessing the value of a currency. Investors look at most other economic indicators only to predict how rates will change in the future.
Inflation in the country accelerated to almost a 40-year high (in February 2022, consumer prices in Canada increased by 5.7% year-on-year after rising by 5.1% in January, reaching a 30-year high, and in May - already to 7.7%). This is the highest figure since March 1983!
The Bank of Canada estimates that the neutral level of the interest rate, at which it does not stimulate or slow down economic activity, is 2.25%.
The current interest rate level is 1.5%. It is widely expected that at this meeting, the Bank of Canada will raise the interest rate again (by 0.75%, as economists predict, to 2.25%).
In the accompanying statement, the Bank of Canada executives will explain the decision and, possibly, share their plans regarding the prospects for monetary policy.
The harsh tone of this statement will cause the Canadian dollar to strengthen. The tendency of the bank's managers to pursue a soft policy may provoke a weakening of the Canadian dollar.
The level of influence on the markets is high.
Great Britain. Speech by the head of the BoE, Andrew Bailey
As the head of the central bank, Bailey has more influence on the dynamics of the British pound than any other person from the UK government. Market participants will closely follow the progress of his speech in order to better understand the prospects for the monetary policy of the BoE.
Volatility during Bailey's speech usually rises sharply in the quotes of the pound and the FTSE London stock exchange index, if he gives any hints of tightening or easing of the monetary policy of the BoE.
If Bailey does not touch on the topic of monetary policy, then the market reaction to his speech will be weak.
The level of influence on the markets is from low to high.
Thursday July 14th
Australia. Australian Employment Report
This report from the Australian Bureau of Statistics is an extremely important indicator of the state of the Australian labor market. Reflecting the monthly change in the number of employed Australian citizens, it is also an important leading indicator of consumer spending, which accounts for most of the total economic activity of the population.
The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value of the indicator is a positive factor for AUD, and a low value is a negative one.
Previous values of the indicator: +60600 in May, +4000 in April, +17900 in March, +77400 in February, +12900 in January 2022.
Forecast: in June, the number of employed citizens increased by +25,000.
The unemployment rate is an indicator that evaluates the ratio of the share of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for AUD.
Previous values of the indicator: 3.9% in May, April and March, 4.0% in February, 4.2% in January.
If the values of the indicators from this report turn out to be worse than the forecast, then the Australian dollar may decline sharply in the short term. If the data turns out to be better than the forecast, then it will have a positive impact on AUD.
The level of influence on the markets is from medium to high.
USA. Producer Price Index (PPI) USA
The leading indicator Producer Price Index (PPI) is one of the leading indicators of inflation in the United States, estimating the average change in wholesale producer prices. Higher production costs raise selling wholesale prices, which is ultimately passed on to the consumer, raising inflation. In normal economic conditions, a high result strengthens the dollar.
Previous values of the indicator: +0.8% (+10.8% in annual terms), +0.4% (+10.9% in annual terms), +1.6% (+11.5% in annual terms), +0.9% (+10.3% in annual terms), +1.2% (+10.0% in in annual terms) in January 2022.
Forecast: the growth of the indicator in June was +0.8% (+ 10.9% in annual terms), which is likely to support the dollar, signaling continued inflationary pressure, including on the Fed towards tightening its monetary policy. If the data turns out to be weaker, the dollar may decline.
The level of influence on the markets is average.
Friday July 15th
China. GDP (quarterly). Retail sales
The National Bureau of Statistics of China will publish a quarterly report on GDP, which is the broadest indicator of economic activity and the main indicator of the state of the economy. High GDP figures will have a positive impact on the quotes of the Chinese yuan, and, conversely, a weak GDP report will have a negative impact on the CNY.
The dynamics of China's GDP indicator is reflected not only in the dynamics of the Chinese yuan, but also in world dynamics, primarily Asian stock indices, as well as in the quotes of commodity currencies such as the New Zealand and Australian dollars. China is the largest trade and economic partner of Australia and New Zealand and a buyer of commodities from these countries.
Therefore, positive macro statistics from China may also have a positive impact on the quotes of these commodity currencies, although the data coming from China recently indicate a slowdown in the world's largest economy, and this is a negative factor for stock markets and commodity currency quotes.
Previous values of Chinese GDP: +1.3% (+4.8% YoY) in the 1st quarter of 2022, +1.6% (+4.0% YoY) in the 4th quarter, +0.2% (+4.9% YOY) in the 3rd quarter, +1.3% (+7.9% in annual terms) in the 2nd quarter, +0.6% (+18.3% in annual terms) in the 1st quarter of 2021.
Forecast: in the 2nd quarter of 2022, the country's GDP grew by +0.6% (+4.4% in annual terms).
The level of influence on the markets is from medium to high.
The retail sales index is published monthly by the National Bureau of Statistics of China and estimates the total volume of retail sales and cash generated. This is the main indicator of consumer spending, which accounts for most of the total economic activity. It is also considered an indicator of consumer confidence and reflects the state of the retail sector in the near future.
An increase in the index is usually a positive factor for CNY; a decrease in the indicator will have a negative impact on CNY.
Previous index values (in annual terms) -6,7%, -11,1, -3,5, +6,7 ( in February 2022) after an increase of +8% in the last months of 2019 and a fall of -20.5% in February 2020).
These are weak data that indicate the slowing pace of recovery of this sector of the Chinese economy after a strong fall in February-March 2020. If the data turns out to be even weaker, then the CNY may weaken sharply.
Forecast: In June 2022, retail sales decreased in China by -7.1% (in annual terms).
The level of influence on the markets is from medium to high.
USA. Retail sales. Retail Control Group
The U.S. Census Bureau will publish the next monthly report on retail sales in the United States. This main leading indicator of consumer spending reflects the total sales of retailers. Consumer spending accounts for most of the total economic activity of the population, while domestic trade accounts for the largest part of GDP growth. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive impact on the USD.
Previous values: -0,3%, +0,7%, +1,4%, +0,8%, +4,9% ( in January 2022).
Forecast for June: +0.8%.
The level of influence on the markets is high.
The "Retail Control Group" indicator evaluates the volume in the entire retail industry and is used to calculate price indices for most goods. A high result strengthens the US dollar, and vice versa, a weak report weakens the dollar. Data worse than the values of the previous period and/or forecast may negatively affect the dollar in the short term.
Previous values: 0%, +0,5%, +1,1%, -0,9%, +6,7% in January 2022.
The level of influence on the markets is high.
USA. University of Michigan Consumer Confidence Index (preliminary release)
This index is a leading indicator of consumer spending, which accounts for most of the total economic activity. It also reflects the confidence of American consumers in the economic development of the country. A high level indicates economic growth, while a low level indicates stagnation. Data worse than the previous values and/or forecast may negatively affect the dollar in the short term. The growth of the indicator will strengthen the USD.
Previous values of the indicator: 50,0, 58,4, 65,2, 59,4, 62,8, 67,2 in January 2022.
Forecast for July: 58.0.
The level of influence on the markets is high.