Forex Trading: Market Size and Liquidity of Different Currencies

Weekly Market Outlook: ECB rate call, US CPI, and more to shape the week!  

Weekly Market Outlook – As recession risks rise, the European Central Bank will make a crucial rate decision this week. Meanwhile, the US dollar awaits CPI and retail sales reports ahead of the Fed’s September meeting. The UK data and China’s economic indicators will also influence market sentiment.  

What to watch on the Economic Calendar this week:  

* - Important    

Monday, September 11:  

  • JPY: M2 Money Stock y/y 
  • GBP: MPC Member Pill Speaks 
  • CNY: New Loans* 
  • CNY: M2 Money Supply y/y 

Tuesday, September 12:       

  • GBP: MPC Member Mann Speaks 
  • AUD: Westpac Consumer Sentiment 
  • AUD: NAB Business Confidence* 
  • EUR: German WPI m/m 
  • GBP: Claimant Count Change* 
  • GBP: Average Earnings Index 3m/y* 
  • GBP: Unemployment Rate 
  • EUR: German ZEW Economic Sentiment 
  • USD: NFIB Small Business Index 
  • GBP: NIESR GDP Estimate 
  • USD: 10-y Bond Auction 

Wednesday, September 13:

  • NZD: FPI m/m 
  • JPY: PPI y/y*/3m 
  • GBP: Industrial Production m/m 
  • GBP: Manufacturing Production m/m 
  • EUR: Industrial Production m/m 
  • GBP: 10-y Bond Auction 
  • EUR: German 30-y Bond Auction 
  • USD: Core CPI m/m* 
  • USD: CPI m/m* 
  • USD: CPI y/y* 
  • USD: Crude Oil Inventories 
  • USD: 30-y Bond Auction 
  • USD: Federal Budget Balance 

Thursday, September 14:

  • AUD: MI Inflation Expectations 
  • AUD: Employment Change* 
  • AUD: Unemployment Rate* 
  • CHF: PPI m/m 
  • EUR: EU Economic Forecasts 
  • EUR: Main Refinancing Rate* 
  • EUR: Monetary Policy Statement* 
  • USD: Core PPI m/m* 
  • USD: Core Retail Sales m/m* 
  • USD: PPI m/m* 
  • USD: Retail Sales m/m* 
  • USD: Unemployment Claims* 
  • EUR: ECB Press Conference* 
  • USD: Natural Gas Storage 

Friday, September 15:  

  • NZD: BusinessNZ Manufacturing Index 
  • CNY: Industrial Production y/y* 
  • CNY: Retail Sales y/y* 
  • CNY: NBS Press Conference 
  • CNY: Unemployment Rate 
  • EUR: French Final CPI m/m 
  • GBP: Consumer Inflation Expectations 
  • EUR: Trade Balance 
  • USD: Empire State Manufacturing Index* 
  • USD: Industrial Production m/m* 
  • USD: Prelim UoM Consumer Sentiment* 
  • USD: Prelim UoM Inflation Expectations* 

Staying updated with the Global Economic Calendar is vital to stay informed about crucial updates, upcoming events, significant announcements, and important data releases.  
Forex Sentiment Analysis: Profiting from the Mood Swings of the Market

Economic data highlights scheduled for September 11 week:

Monday marks the 22nd anniversary of the tragic September 11 attacks. Although not a federal holiday, it’s a day that calls for solemn remembrance and heightened security. While stock and bond markets will remain open, our focus will be on honoring the lives lost and supporting one another. On the policy front, Federal Reserve policymakers will be silent, refraining from discussing monetary policy during the blackout period surrounding the September 19-20 FOMC meeting.

Eyes will be on two key economic reports that could potentially shape the outlook for the meeting. One report to watch is the August CPI data, scheduled for release at 8:30 ET on Wednesday. Any indication of renewed inflation pressures could shift the policy debate. Currently, economic and labor market data align with previous FOMC forecasts, leading most analysts to predict an interest rate hike pause in September.

However, should policymakers feel the need to curb persistent inflation, another hike might not be far off. The CPI report will also include the August CPI-W index, which determines cost-of-living adjustments for social security benefits. While the final percent change won’t be known until September, the average of the July and August reports should provide insight into what we can expect in January 2024. Additionally, keep an eye on the retail and food services sales numbers for August, set to be released at 8:30 ET on Thursday.

These figures will help gauge consumer spending’s impact on third-quarter GDP growth and the economy’s overall resilience. Factors such as back-to-school shopping, autumn merchandise sales, and even gasoline costs will all contribute to the retail landscape. These updates will shape our understanding of the current economic climate and how it might unfold in the near future. Let’s stay informed and support each other during this important time.  

United States/USD: Get for a data-packed week in the U.S.! 

We’re expecting some big numbers that may show increased inflation, softer demand, and slower gains in industrial output. According to Bloomberg’s survey, consumer prices are forecasted to rise by 0.6% in August, matching the largest monthly gain since June 2022. The year-over-year rate could climb to 3.5%, the second consecutive monthly increase.

On the flip side, the core rate is expected to rise by 0.2%, bringing the 12-month rate down to 4.3%, the lowest since September 2021. But that’s not all! We’ve also got insights on retail sales. Auto sales dipped in August, likely impacting the overall retail sales figures. The survey suggests a modest 0.2% increase in headline retail sales, with a 0.4% gain excluding autos.
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However, the core retail sales, which exclude autos, gasoline, building materials, and food services, are projected to decline by 0.1% in August. Let’s not forget about industrial output! After a slump in May and June, industrial output rebounded with a 1.0% jump in July. The manufacturing sector, driven by the auto industry, saw a 0.5% increase. Auto output hit its fastest rate in four-and-a-half years.

Excluding motor vehicles, manufacturing output managed a slight 0.1% gain. On top of these data points, the Dollar Index continues its impressive rally, reaching above 105.00 for the first time in six months. It’s pushing the boundaries and flirting with the upper Bollinger Band (~105.15). Keep an eye on the 105.40 area, which corresponds to the (38.2%) retracement of the decline from the multiyear high (~114.80) last September.  

Eurozone/EUR: Swaps Market Predicts 70% Chance of Q4 Rate Hike 

The chances of the European Central Bank hiking rates at its September 14 meeting have gradually eased, currently sitting around a 35% probability. This is a significant drop from the previous estimate in mid-August. However, don’t think the ECB is done just yet. President Lagarde is likely to emphasize that fact.  According to the swaps market, there is approximately a 70% chance of a rate hike in Q4. But here’s the catch: the base effect suggests a sharp drop in eurozone CPI in September and October.

While November and December present more challenging comparisons, the weakening euro and rising oil prices could balance the scales.  It’s worth noting that the ECB’s previous forecast of 5.4% CPI this year seems a bit optimistic, given the preliminary reading in August. Moreover, growth projections are also higher than expected, despite lingering weakness in Germany’s industrial sector. All eyes will be on the eurozone’s July industrial production figures, set to be released on September 13, the day before the ECB meeting.  

The euro’s recent performance? It has seen its ups and downs, with eight consecutive weeks of decline. Although it briefly dipped below $1.07, there is resistance around $1.0750, while the next key area to watch is $1.0600-35. Keep an eye on the momentum indicators as well; they may be overextended, but they’re still on a downward trajectory. Stay tuned!   

United Kingdom/GBP: Wage Data’s Impact on Sterling! 

Get ready for some important data points coming up in the week ahead! First up, we have the employment report on September 12th. In July, the number of employees on payroll skyrocketed by 97.2k, surpassing the combined numbers from May and June (87.9k). We also saw a rise in jobless claims, with a 29k increase, surpassing the cumulative increase of the previous three months (17.1k).  But wait, there’s more! The growth in average weekly earnings is causing quite a buzz.

From a year-over-year perspective, they jumped 8.2% in the three months through June, marking the fourth consecutive increase and the most in two years. When we exclude bonuses, the pace is a little slower, hitting 7.8% in June. Don’t worry, we expect it to maintain these high levels in July. Now, let’s move on to the second important data point: the July GDP and details.
Weekly Market Outlook

The UK economy had a fantastic performance in June, growing by 0.5%, the strongest in months! Industrial output, specially manufacturing, played a significant role in this growth, surging by 1.8% and 2.4% respectively. Construction was also strong at 1.6%.  However, we don’t anticipate seeing the same level of performance in July. In fact, we already know that retail sales took a sharp decline in July, plunging even more than expected (-1.2%, and -1.4% excluding gasoline and diesel), practically offsetting the gains of the previous months. 

As for sterling, it experienced a fall of around 1.5 cents last week, settling near its lows. The stronger dollar and seemingly dovish comments from Bank of England Governor Bailey were the main factors behind this. We had been anticipating a test in the $1.2400-25 area since the break of $1.26, and the momentum indicators and moving averages seem to confirm this. Keep an eye on the wage data, as Sterling will likely be sensitive to it.  

China/CNY: China reported August CPI and PPI on September 9. 

Deflationary conditions eased, with consumer prices rising from -0.3% YoY in July to +0.1% in August. Food prices fell 1.7% YoY, while non-food prices rose 0.5%, driven by airline tickets and the hospitality industry. Core inflation remained unchanged at 0.8%. August PPI stood at -3.0% (-4.4% in July), the least negative reading since March.  

This week’s focus is on new yuan loans, aggregate financing, industrial production, and retail sales. China’s per capita consumption growth has been weak in recent years due to policy choices and the zero-Covid approach. The PBOC may increase funds rather than cutting benchmark rates.  The yuan fell more than 1% last week, approaching CNY7.35 against the USD.

The expectations of the PBOC defending a fixed level may underestimate their understanding and pragmatism. The yuan’s weakness seems more likely than its strength, considering monetary policy divergence. Beijing has the power to manage the decline and maintain order.  

Japan/JPY: Concerns Over the Weakening Yen!

Despite strong spring wage negotiations and government subsidies for energy, household consumption continues to decline. The 4.8% growth (revised down from 6%) relied on net exports, including hospitality services, and the economy is expected to slow sharply this quarter. Bloomberg’s survey forecasts a 1.3% contraction (annualized rate) in Q3. 

The initial estimate of July industrial output, which was projected to decline by 2.0%, will be revised on September 14. June’s 0.4% decline surpassed Bloomberg’s median forecast. Japanese investors have been net buyers this year, exceeding $100 billion. A cabinet reshuffle is unlikely to impact the market and is more likely about internal politics.  Japanese officials have expressed concern about the yen’s weakness but are yet to take material action.

The dollar has largely remained in a range between JPY146.40 and JPY147.85. The BOJ is unlikely to intervene before the US CPI release on September 13. The BOJ intervened twice last year, resulting in a 3.75% and 4.25% decline in the dollar.  

Australia/AUD: August employment data is the highlight of the week!

Looking at the last seven quarters, there’s been a pattern: if there’s a decline in any of the months, the first month of the quarter sees a loss of full-time jobs. In line with this, Australia lost 24.3k jobs in July (29.2k lost in April and 21.1k decline in January). Economists expect a recovery in August, with a median forecast of a 25.5k increase in employment.  

Weekly Market Outlook,CPI,Inflation,GDP Market Analysis

The Aussie fell by about 0.75% last week, marking the seventh weekly drop in the past eight. It reached a three-day high (~$0.6415) ahead of the weekend, a little shy of the $0.6420 area, which represents a (38.2%) retracement of the last leg down that started from a little above $0.6520 on September 1. Despite this, the Aussie is struggling to sustain upside momentum and settled around $0.6375.  

Canada/CAD: Wage Growth in Canada Hits Four-Month High

Upcoming data, like the monthly portfolio flow report and existing home sales, sits between the Bank of Canada meeting last week and the CPI due on September 19. Q2 GDP unexpectedly contracted (-0.2% annualized, while the median forecast was for a 1.2% gain).  

On the other hand, August employment data released before the weekend showed stronger-than-expected growth in full-time jobs, with the unemployment rate holding steady at 5.5%. The participation rate slipped slightly (65.5% vs. 65.6%). The average hourly wage for permanent employees accelerated to a four-month high of 5.2% year-over-year.  

After briefly falling to test support near CAD1.3600, the greenback recovered to around CAD1.3645. A break of CAD1.3565 may be needed to encourage a deeper correction after the greenback’s recent rise. The Canadian dollar was the second-best performer in the G10 last week, losing 0.35% behind the Norwegian krona (-0.20%).  

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