Weekly Market Outlook: RBA, BOE and Non-Farm payrolls in focus
With recent market volatility increasing in the currency markets, traders will be looking towards Friday's US Non-Farm payrolls (NFP) number to halt the dollar's decline which was the weakest currency last month. Overall it's a big week for employment figures around the world as New Zealand and Canada also release its latest figures on Tuesday and Friday respectively.
Traders will also have a keen eye on two major central bank announcements this week from the Reserve Bank of Australia on Tuesday and the Bank of England on Thursday. Both the Australian dollar and British pound have been rising higher in recent weeks so it's setting up to be a very important announcement to watch.
You can read more about this week's NFP and central bank announcements further down this article in the 'key economic reports and markets to watch' section.
While most major companies have reported their latest quarterly earnings, there are still a few left for this week. This includes Walt Disney, T-mobile US, Tripadvisor, Bayer, Allianz, Commerzbank, BMW, Lufthansa, Adidas, HSBC, BP, easyJet and others.
Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admiral Markets UK Ltd.
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Key economic reports and markets to watch
US Non-Farm Payrolls (NFP)
The US Non-Farm payroll report is one of the most hotly anticipated news events of the month. On Friday at 1.30pm BST, the US releases its Average Hourly Earnings m/m report, the Non-Farm Employment Change number and the Unemployment Rate.
Traders are expecting the US economy to have added more than 2.3 million jobs which should push the unemployment rate lower to 10.3% from 11.1%. However, many analysts believe it is too early to see the effects of recent issues with some states slow to ease lockdown conditions, if at all. Nonetheless, it's still likely to have a huge impact on the US dollar as it was the weakest currency for July.
A variety of factors have aided in the demise of the US dollar. This includes new love for the euro from large asset managers, a slowing US economic recovery, inaction from the Federal Reserve in last week's FOMC press conference and the political situation weighing on the dollar's 'safe-haven' status.
Source: Admiral Markets MetaTrader 5, #USDX_HU0, Monthly - Data range: from 1 March 2008 to 3 Aug 2020. Please note: Past performance is not a reliable indicator of future results. Last five-year performance:
In the above monthly price chart of the US Dollar Index Futures CFD, price has been falling lower since rejecting the upper horizontal resistance line just below the 130.00 level. While traders will be eyeing the major horizontal support level at 88.50, price has stalled at an intermediate level of support at around 92.50. A break beyond this level could well see sellers take control towards 88.50. However, a more positive tone this week from US economic data could attract some buyers at current support levels.
Bank of England Monetary Policy Summary
Much to everyone's surprise the British pound climbed higher against all other G6 currencies towards the end of last month. The impressive rally higher in the GBPUSD is largely down to the weakness of the US dollar. However, the sterling has been rising against its other peers suggesting something else is going on.
Some analysts point to the better than expected economic data in recent weeks with a higher retail sales number last month. It seems that traders are not yet focused on the outcome of Brexit negotiations as things quieten down over the summer months before critical talks take place in September. Along with the threat of a second wave - after some Northern cities go back into lockdown - the Bank of England may take a more dovish tone in its Monetary Policy Summary release on Thursday at 12pm BST.
Employment levels are still down and most analysts fear the end of the government's furlough scheme in October where there is an overwhelming agreement it is too early to end it. Traders will be looking for potential clues on the possibility of negative interest rates but the bank is unlikely to make any changes to its monetary policy just yet. The currency may be more affected by any significant movements in the US dollar this week.
Source: Admiral Markets MetaTrader 5, GBPUSD, Monthly - Data range: from 1 April 2005 to 3 August 2020. Please note: Past performance is not a reliable indicator of future results.
In the above long-term, monthly price chart of GBPUSD, it's clear to see the recent rise from the horizontal support line at 1.21476. With no major resistance in the way until the 1.40000 level, a weak US dollar could help lift the pound even further. Overall, the monthly price chart depicts a sideways trading range giving defined levels of support and resistance for traders to use.
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Corporate trading updates and stock indices
While most stock market indices around the world started off the beginning of last month in an impressive manner, many gave back gains towards the end. Over the recently reported earnings season it's clear to see why individual stock indices have diverged. The Nasdaq 100 has soared to all-time high price levels while many others have failed to get beyond the high of this year made in February.
European indices have been the worst hit, most likely due to a resurgent euro and British pound. With the optimism of central bank stimulus dissipating, all eyes will be on the additional stimulus package that is being negotiated in Congress. This may at least help US stock indices which have been the better performing global stock market in recent weeks.
Among this backdrop, there are a raft of earnings announcements from some major heavyweights this week. This includes:
- Monday 3 August - HSBC Holdings PLC (LSE)
- Tuesday 4 August - Bayer AG, Diageo PLC, BP PLC, easyJet PLC
- Wednesday 5 August - Allianz SE, Continental AG, Commerzbank AG, BMW AG, Walt Disney Co,
- Thursday 6 August - Deutsche Lufthansa AG, Adidas AG
- Friday 7 August - T-Mobile US Inc, TripAdvisor Inc
The long-term, monthly price chart of the DAX 30 shows a recent rejection of historic highs around the 13229.00 level. Buyers have, so far, failed to break this level giving the sellers the edge in the short-term. If price can break above this level there could be a retest of the all-time high price level made at the beginning of the year. However, with new government and central bank stimulus there is a chance the recent optimism may find around these historic price levels.
Source: Admiral Markets MetaTrader 5, DAX30, Monthly - Data range: from 1 June 2005 to 3 August 2020. Please note: Past performance is not a reliable indicator of future results.
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