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Having beaten off the losses of the last three weeks, the DXY dollar index ends the week in positive territory with a decent gain.
According to the minutes of the July meeting released last Wednesday, Federal Reserve officials agreed on the advisability of raising the interest rate by 75 basis points, but decided that it would "depend on incoming information" regarding future hikes. It is also possible that at some stage "it would be appropriate to slow down the rate of hike."
Nevertheless, the published minutes confirmed the intention of the Fed leadership to fight inflation resolutely, including by consistently tightening monetary policy. And this is a strong argument in favor of further strengthening of the dollar.
It is also worth noting that the growth of US stock indices stopped last week. Market participants again turned to the dollar, preferring it to other popular defensive assets - gold, yen, franc.
Next week, financial market participants will pay attention to the release of important macroeconomic statistics for Germany, the eurozone, Great Britain, New Zealand, and the US.
Particular attention will be paid to the Fed's annual economic forum in Jackson Hole, Wyoming, starting on Thursday, 25 August. It will be attended by representatives of the world's leading central banks and economists. Their statements can have a significant impact on the dynamics of financial markets. Fed Chairman Jerome Powell will make a speech on the first day of the forum. The main attention of market participants will be riveted to his speech in order to more accurately determine for themselves the prospects for the Fed's monetary policy, and hence the dynamics of the dollar and major US stock indices.
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.China. The decision of the National Bank of China on the interest rate
The level of interest rates is the most important factor in assessing the value of a currency. Most other economic indicators are only looked at by investors to predict how rates will move in the future. Since the Chinese economy is, according to various estimates, the first in the world (at the moment), Chinese macro data and decisions of the country's monetary authorities can have a great impact on the financial market and investor sentiment, especially on the markets of the Asia-Pacific region.
It is expected that this People's Bank of China meeting will keep the interest rate at the same level of 3.70%, although unexpected decisions are not ruled out. If the PBOC makes unexpected statements or decisions, then volatility could increase throughout the financial market. Investors will also be interested in the bank's assessment of the consequences of the coronavirus for the Chinese economy and its policies in the near future, in this regard.
The level of influence on the markets of the final assessment is from low to high.
Germany. Index (PMI) of business activity in the manufacturing sector (preliminary release). Composite Index (PMI) of business activity (preliminary release)
This S&P Global report is an analysis of a survey of 800 purchasing managers that asks respondents to rate the relative level of business conditions, including employment, production, new orders, prices, supplier shipments and inventory. Since purchasing managers have perhaps the most up-to-date information about the situation in the company, this indicator is an important indicator of the state of the German economy as a whole. This sector of the economy forms a significant part of Germany's GDP. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro.
Previous values: 49.3, 52.0, 54.8, 54.6, 56.9, 58.4, 59.8, 57.4, 57.4, 57.8, 58.4, 62.6
The level of influence on the markets is high.
The Composite PMI is an important indicator of business conditions and the overall health of the German economy. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro.
Data worse than the forecast and/or the previous value will have a negative impact on the euro.
Previous values: 48.1, 51.3, 53.7, 54.3, 55.1, 55.6, 49.9, 52.2, 52.0, 55.5, 60.0, 62.4
The level of influence on the markets is high.
Eurozone. Composite index (PMI) of business activity in the manufacturing sector (preliminary release)The Eurozone Manufacturing PMI (from S&P Global) is an important indicator of the state of the entire European economy. A result above 50 is considered positive and strengthens the EUR, below 50 is considered negative for the euro. Data worse than the forecast and/or the previous value will have a negative impact on the euro.
Previous values: 49.9, 53.0, 54.8, 55.8, 54.9, 55.5, 52.3, 53.3, 55.4, 54.2, 56.2, 59.0.
The level of influence on the markets is high.
UK. Service PMI (preliminary release)
The PMI in the UK services sector (S&P Global) is an important indicator of the state of the British economy. The service sector employs the majority of the UK's working-age population and generates approximately 75% of GDP. The most important part of the service industry is still financial services. If the data turns out to be worse than the forecast and the previous value, then the pound is likely to fall sharply in the short term. 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 considered positive and strengthens the GBP, below 50 is considered negative for the GBP.
Previous values: 52.6, 54.3, 53.4, 58.9, 62.6, 60.5, 54.1, 53.6, 58.5, 59.1, 55.4, 55.0
The level of influence on the markets is high.
USA. Orders for durable goods. Capital goods orders (excluding defense and aviation)
Durable goods are defined as solid products with an expected life of more than three years, such as cars, computers, household appliances, aircraft, and involve large investments in their production.
This leading indicator measures the change in the total value of new durable goods orders placed with manufacturers. Growing orders for this category of goods signal that manufacturers will ramp up activity as orders are filled.
Capital goods are durable goods used to produce durable goods and services. Goods produced in the defense and aviation sectors of the US economy are not included in this indicator.
A high result strengthens the USD, a decrease in the indicator has a negative effect on the USD.
Durable goods orders previous values: +0.3% (in June), +0.8% in May, +0.5% in April, +1.1% in March, -2.1% in February, +1.6% in January.
Previous values of the indicator "orders for capital goods excluding defense and aviation": +0.5% in June, +0.6% in May, +0.4% in April, +1.3% in March, -0, 2% in February, +0.9% in January.
The level of influence on the markets is high.
US. Pending home sales transactions
The US National Association of Realtors will publish a report with data on pending transactions in the housing market. This indicator shows the change in the number of houses prepared for sale, but still waiting for the contract to close. This is one of the most important indicators for the US real estate market, which also characterizes activity in the construction sector of the economy, and the sale of a house causes a wide-ranging associated effect: repairs, mortgages, brokerage and banking services, transportation, etc.
A high result has a positive effect on the USD, a low result and a relative decline have a negative effect.
Previous indicator values: -8.6%, +0.4%, -4.0%, -1.6%, -4.0%, -5.8% (January 2022).
The level of influence on the markets is average.
New Zealand. Retail sales
The New Zealand Bureau of Statistics will publish the next quarterly report on retail sales in the country. This major leading indicator of consumer spending reflects the total sales of retailers. Consumer spending accounts for most of the overall economic activity of the population, while domestic trade accounts for the largest part of GDP growth. A relative decline in the indicator could have a short-term negative impact on the New Zealand dollar, while an increase in the indicator would have a positive effect on the NZD.
Previous values: -0.5% (Q1 2022), +8.3% (Q4 2021), -8.2% (Q3 2021), +3 .3% (in Q2 2021), +2.8% (in Q1 2021).
The level of influence on the markets is average.
Annual economic symposium in Jackson Hole, Wyoming, organized and sponsored by the Fed. At the symposium, representatives of the world's central banks and academic economists discuss issues of the world economy and speak out about the prospects for the monetary policy of central banks. Statements by representatives of central banks may have a significant impact on national currencies, including the US dollar. The degree of this influence will depend on the tone of speeches of representatives of the central banks.
US. Annual GDP for the 2nd quarter (second estimate)
This indicator is the main indicator of the state of the American economy, and along with data on the labor market and inflation, data on GDP are key for the country's central bank in determining the parameters of its monetary policy.
Solid results strengthen the US dollar; weak reports on GDP have a negative impact on the US dollar.
There are three versions of the GDP, released at intervals of a month - Preliminary, Updated and Final. The pre-release is the earliest and has the most impact on the market. The final release has less impact, especially if it matches the forecast.
Previous values of the indicator (in annual terms): -1.6%, +6.9%, +2.3%, +6.7%, +6.3% (in the 1st quarter of 2021).
Forecast (second estimate) for Q2 2022: -0.9% (first estimate was -0.9% and forecast +1.0%).
The level of influence on the markets is high.
US. Price Index for Personal Consumption Expenditure (PCE Price Index). Unemployment claims
The Price Index for Personal Consumption Expenditure (PCE) is one of the main measures of inflation that FOMC officials at the Fed use as an indicator of inflation.
The rate of inflation (apart from the state of the labor market and GDP) is important to the Fed in setting the parameters of its monetary policy. Rising prices put pressure on the central bank to tighten its policies and raise interest rates.
Higher-than-forecast PCE readings could push the US dollar higher as it hints at a possible hawkish shift in the Fed's forecasts, and vice versa.
Previous values: +7.1% (Q1 2022), 6.4% (Q4 2021), +5.3% (Q3), +6.5% (in Q2), +3.8% (in Q1 2021).
The preliminary estimate was: +7.1% (in the 2nd quarter of 2022).
The level of influence on the markets is medium to high.
At the same time, the US Department of Labor will publish a weekly report on the state of the US labor market with data on the number of primary and secondary claims for unemployment benefits. The state of the labor market (together with data on GDP and inflation) is a key indicator for the Fed in determining the parameters of its monetary policy.
The result is higher than expected and the growth of the indicator indicates the weakness of the labor market, which has a negative impact on the US dollar. The drop in the indicator and its low value is a sign of a recovery in the labor market and may have a short-term positive impact on the USD.
Initial and repeat jobless claims are expected to remain at pre-coronavirus lows, which is also positive for the dollar, indicating the stability of the US labor market.
Previous (weekly) figures for initial jobless claims: 262,000, 248,000, 254,000, 261,000, 244,000, 235,000, 231,000, 232,000, 202,000, 211,000
Previous (Weekly) Values for New Jobless Claims Data:
1,428,000, 1,420,000, 1,368,000, 1,384,000, 1,333,000, 1,372,000, 1,324,000, 1,331,000, 1,309,000, 1,309,000
The level of influence on the markets is medium to high.
Annual Economics Symposium at Jackson Hole
US. Personal Consumption Expenditure (PCE Core Price Index). Unemployment claims
The PCE Annual Core Price Index (excluding volatile food and energy prices) is the primary measure of inflation that Fed FOMC officials use as a primary measure of inflation.
The rate of inflation (apart from the state of the labor market and GDP) is important to the Fed in setting the parameters of its monetary policy. Rising prices put pressure on the central bank to tighten its policies and raise interest rates.
Higher-than-expected Core Price Index (PCE) readings could push the US dollar higher as it hints at a possible hawkish shift in the Fed's forecasts, and vice versa.
Previous values: +4.8% (annualized), +4.7%, +4.9%, +5.2%, +5.3%, +5.2% (in January 2022).
The level of influence on the markets is medium to high.
USA. University of Michigan Consumer Confidence Index (final release)
This index is a leading indicator of consumer spending, which accounts for the majority of overall economic activity. It also reflects the confidence of American consumers in the economic development of the country. A high level indicates growth in the economy, while a low level indicates stagnation. Data worse than previous values and/or forecast may have a negative impact on the dollar in the short term. The growth of the indicator will strengthen the USD.
Previous indicator values: 51.5, 50.0, 58.4, 65.2, 59.4, 62.8, 67.2 in January 2022.
Forecast for August: 55.1 (preliminary estimate was 55.1).
The level of influence on the markets is medium to high.
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