Most Important Economic Events of the Week 08.15.2022 – 08.21.2022
Despite the growth on Friday, the dollar and its DXY index ended the past week in negative territory.
The markets continue to be shaken by contradictory macro statistics coming from the US. Thus, after the inspiring monthly report on the US labor market, published on the first Friday of the month, dollar sellers went on the attack again last week, after fresh data on inflation was published.
From the report of the US Bureau of Labor Statistics, it follows that the consumer price index (CPI) came out in July with a value of 8.5% (year-on-year), which was lower than the forecast of 8.7% and the previous value of 9.1%. Weaker inflation data significantly dampened expectations for a larger Fed rate hike, putting pressure on the dollar.
However, it is still not worth rushing to sell the dollar, as economists say, explaining this by continuing geopolitical risks and the upcoming midterm elections to the US Congress this fall.
It's also worth noting that San Francisco Federal Reserve Bank President Mary Daly said on Thursday that 50 basis points rate hike in September "makes sense" given the latest economic data, including inflation. In a media interview, she highlighted the possibility of 75 basis points rate hike at the Fed meeting in September if macro data so requires.
One way or another, inflation in the US is still "unacceptably" high.
Next week, market participants will pay attention to macro data on China, the US, the Eurozone, Australia, Canada, the UK, as well as the results of the New Zealand RB meeting on monetary policy.
Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:
*) new events can be added to the calendar and/or some scheduled events canceled during the coming week
Monday, August 15
In Europe, the Day of the Assumption of the Virgin Mary is celebrated. European banks will not work, and therefore the trading volumes on the financial markets will also be lower than usual.
02:00 CNY Retail Sales Index
Retail Sales Index is published monthly by the National Bureau of Statistics of China and measures total retail sales and cash receipts. The index is often considered an indicator of consumer confidence and economic well-being and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the CNY; a decrease in the indicator will have a negative impact on CNY.
The previous value of the index (in annual terms) +3.1% (after an increase of +8% in the last months of 2019 and a fall of -20.5% in February 2020).
Forecast: In July 2022, retail sales in China grew by +5.0% (yoy). This is positive data after a contraction in previous months, which indicates an acceleration in the pace of recovery after a strong fall in February-March 2020. If the data turns out to be weaker, then the CNY may weaken.
Tuesday, August 16
01:30 AUD Minutes from the August meeting of the RB Australia
This document is published two weeks after the meeting and the decision on the interest rate. If the RBA is positive about the state of the labor market in the country, the GDP growth rate, and also shows a “hawkish” attitude towards the inflationary 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, first of all, inflation puts pressure on the AUD.
During the recent (August) meeting, the RBA raised the interest rate (for the fourth time since November 2010), at once by 0.50%, bringing it to 1.85%, in order to contain inflation, which reached a maximum in 20 years (in the 1st quarter of 2022, Australian headline annual consumer price inflation was 5.1% and core inflation was 3.7%). In addition, the RBA signaled the likelihood of a further increase in the coming months. Market participants are now pricing in an increase in the RBA interest rate to 2.5% by the end of this year.
"The Board will do everything necessary to ensure that, over time, inflation in Australia returned to the target level," said the governor 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.
"Given the progress towards full employment and data on prices and wages, some curtailment 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 from the current 0.35% and keep it there next year.
Thus, the Australian dollar received an impulse to grow. However, if the published protocol contains unexpected information regarding RBA monetary policy issues, the volatility in AUD quotes will increase.
06:00 GBP A report on the average British salary for the last 3 months. Unemployment rate
On a monthly basis, the UK National Statistics Office (ONS) publishes a report on average earnings covering the last 3 months, including bonuses and no bonuses.
This report is a key short-term indicator of the dynamics of changes in the level of wages of employees in the UK. Earnings growth is positive for the GBP, while a low reading is negative.
Forecast: the August report suggests that the average salary, including bonuses, rose again in the last calculated 3 months (April-June), by +5.2% after an increase of +6.2%, +6.8%, +7.0%, +5.4%, +4.8%, +4.3%, +4.2%, +4.9 %, +5.8%, +7.2%, +8.3%, +8.8%, +7.3%, +5.6%, +4.0% in previous periods); without premiums also increased (by +4.4%) after growth by +4.3%, +4.2%, +4.2%, +4.1%, +3.8%, +3.7%, +3.8%, +4.3%, +4.9%, +6.0%, +6.8%, + 7.4%, +6.6%, +5.6%, +4.6% in previous periods). Thus, the data points to the continued growth of wages, which is a positive factor for the pound. If the data turns out to be better than the forecast and / or previous values, then the pound is likely to strengthen in the foreign exchange market. Data worse than forecast/previous values will have a negative impact on the pound.
Also at this time are published data on unemployment in the UK. It is expected that for 3 months (April-June), unemployment was at the level of 3.8% (against 3.8%, 3.8%, 3.7%, 3.8%, 3.9%, 4.1%, 4.2%, 4.3%, 4.5%, 4.6%, 4.7%, 4.8%, 4.7%, 4.8%, 4.9%, 5.0%, 5.1%, 5.0% in previous periods).
Since 2012, the UK unemployment rate has declined steadily (from 8.0% in September 2012). This is a positive factor for the pound, the rise in unemployment is a negative factor.
If the data from the UK labor market turn out to be worse than the forecast and / or the previous value, then the pound will be under pressure.
In any case, at the time of the publication of data from the British labor market, an increase in volatility is expected in the pound quotes and on the London Stock Exchange.
12:30 CAD Canadian Core Consumer Price Index
The Core CPI from the Bank of Canada reflects the dynamics of the retail prices of the corresponding basket of goods and services (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation and tobacco products). The inflation target for the Bank of Canada is in the range of 1% -3%. The rise in CPI is a harbinger of a rate hike and a positive factor for CAD. The core consumer price index increased in June 2022 by +0.3% (+6.2% in annual terms), +0.8% (+6.1% in annual terms) in May, +0.7% (+5.7% in annual terms) in April, in March 2022 by +1.0% (+5.5% in annual terms), in February 2022 by +0.8% (+4.8% in annual terms), in January +0.8% (+4.3% in annual terms). If the expected data turns out to be worse than the previous values, then this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar. Forecast for July: +0.6% (+6.7% in annual terms).
Wednesday, August 17
02:00 NZD RB of New Zealand interest rate decision. RBNZ 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 ease inflation and contain rapidly rising house prices. The current RBNZ interest rate is 2.5%
Earlier, the RBNZ said that the economy no longer needs the current level of monetary stimulus.
It is expected that at this meeting the RBNZ will raise the interest rate again, 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 decision on the interest rate and comments on the economic conditions that facilitated the adoption of this decision.
At this time, the volatility in the quotations of the New Zealand dollar may rise sharply.
Earlier, the RBNZ stated that against the background of "many uncertainties", monetary policy "will remain soft in the foreseeable future", but "may be adjusted accordingly".
03:00 NZD RBNZ press conference
RBNZ chief Orr will comment on the rate decision. Usually, during its course, volatility in NZD quotes increases.
06:00 GBP Consumer Price Index. Core consumer price index
The consumer price index (CPI) reflects the dynamics of retail prices for a group of goods and services that make up the British consumer basket. The CPI is a key indicator of inflation. Around its publication will be the main movement of the pound in the foreign exchange market, as well as the London Stock Exchange FTSE100 index.
In the previous reporting month (June), the growth in consumer inflation amounted to +0.8% (+9.4% in annual terms). The data suggests growing inflationary pressures, which are likely to support the pound. The indicator reading below the forecast / previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to adhere to a soft monetary policy. Forecast for July: 0% (+9.8% in annual terms).
The Core CPI of Consumer Prices is published by the Office for National Statistics and determines the change in prices for a selected basket of goods and services (excluding food and energy) for a given period. It is a key indicator for assessing inflation and changes in purchasing preferences. A positive result strengthens the GBP, a negative result weakens it.
In June, the Core CPI (on an annualized basis) increased by +5.8%. It is likely that the publication of the indicator will have a positive impact on the pound in the short term if its value is higher than the forecast and previous values. The indicator reading below the forecast and/or previous values may provoke a weakening of the pound. Forecast for July: +6.4% (in annual terms).
09:00 EUR Eurozone GDP for the 1st quarter (second estimate)
GDP is considered to be an indicator of the overall health of the economy. The upward trend in GDP is considered positive for the EUR; a poor result weakens the EUR.
Recently, macro data has been coming from the Eurozone, indicating a gradual recovery in the growth rate of the European economy after a sharp drop in early 2020. Thus, according to the forecast of economists, GDP growth in the Eurozone is expected in the 2nd quarter of 2022 by +0.7% (+4.0% in annual terms) after growth by +0.6% (+5.4% in annual terms) in the 1st quarter of 2022, +0.3% (+4.6% in annual terms) in the 4th quarter, +2.2% (+3.9% in annual terms) in the 3rd quarter, +2.2% (+14.3% in annual terms) in the 2nd quarter and a decline of -0.3% (-1.3% in annual terms) in the 1st quarter of 2021. The first estimate was +0.1% (+3.4% in annual terms).
If the data turns out to be weaker than the forecast and / or previous values, then the euro may decline. Better-than-forecast data may strengthen the euro in the short term, although it is still far from the full recovery of the European economy even to pre-crisis levels.
12:30 USD Retail sales. Retail control group
This report (Retail Sales) reflects the total sales of retailers of all sizes and types. Changes in retail sales are the main indicator of consumer spending. The report is a leading indicator, and in the future the data may be greatly revised. A high result strengthens the US dollar, a low one weakens it. A relative decrease in the indicator may have a short-term negative impact on the dollar, while an increase in the indicator will have a positive effect on the USD. In the previous month (June), the value of the indicator was +1.0% (after a decrease of -0.1% in May, an increase of +0.7% in April, +1.4% in March, +0.8% in February, +4.9% in January 2022 of the year). A decrease in the indicator will indicate the instability of improvement in this sector of the American economy. July forecast: +0.1%.
Retail sales is the leading indicator of consumer spending in the United States, showing changes in retail sales. The Retail Control Group indicator measures volume across the entire retail industry and is used to calculate price indices for most products. A strong result strengthens the US dollar, and vice versa, a weak report weakens the dollar. A slight increase in indicators is unlikely to accelerate the growth of the dollar. The data is worse than the values of the previous period (+0.8%, -0.3%, +0.5%, +1.1%, -0.9%, +6.7% (in January) may negatively affect the dollar in the short term.
18:00 USD Minutes from the last (July) meeting of the Federal Open Market Committee ("FOMC minutes")
The publication of the minutes is extremely important for determining the course of the current policy of the Fed and the prospects for raising interest rates in the US. The volatility of trading in financial markets during the publication of the protocol usually increases, since the text of the protocol often contains either changes or clarifying details regarding the results of the last FOMC meeting of the Fed.
Following the meeting, which ended on March 15-16, the leaders of the central bank raised the interest rate by 0.25% (for the first time since 2018) and announced their intention to raise interest rates another 6 times in 2022, also allowing for the possibility of a tougher decision. In June, the Fed also began to reduce the size of its balance sheet, and at a meeting on June 14-15 decided to raise interest rates to 1.75%. The current Fed interest rate is 2.50%.
Economists and market participants are now evaluating how effective the Fed will be in dealing with inflation, which has reached its highs in the past 40 years.
The soft tone of the protocol will have a positive impact on stock indices and negatively on the US dollar. The harsh rhetoric of the Fed's leaders regarding the prospects for monetary policy will push the dollar to further growth.
Thursday, August 18
01:30 AUD Employment rate. Unemployment rate
The employment rate reflects the monthly change in the number of Australian citizens employed. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high reading is positive for the AUD, while a low reading is negative. Previous values of the indicator: +60600 in May, +4000 in April, +17900 in March, +77400 in February, +12900 in January 2022.
Also at the same time, the Australian Bureau of Statistics will publish a report on the unemployment rate - an indicator that estimates the ratio of the proportion 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 decline in the indicator is a positive factor for the AUD.
Forecast: Unemployment in Australia remained at lowest levels in July, at 3.5% (versus 3.5% in June, 3.9% in May and April, 4.0% in March and February, 4.2% in January) approaching pre-coronavirus levels, and employment rose by another +25,000 Australian workers.
The leaders of the RBA have repeatedly stated that, in addition to the situation in international trade, the Australian economy and the central bank's monetary policy plans are influenced by the indicators of the level of household debt and expenditures, the growth of workers' salaries, as well as the state of the country's labor market. If the values of the indicators turn out to be worse than the forecast, then the Australian dollar may significantly decline in the short term. Better-than-expected data will strengthen AUD in the short term.
Friday, August 19
12:30 CAD Retail Sales Index
The Retail Sales Index is published monthly by Statistics Canada and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the near term. An increase in the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. The previous index value (for May) is +2.2%. If the data for June turns out to be weaker than the forecast and/or the previous value, the CAD may decline sharply in the short term.