Economic calendar for the week 26.10.2020 - 01.11.2020

2020-10-24

2020-10-25

Economic calendar for the week 26.10.2020 – 01.11.2020Jana Kane

**Review of the main events of the Forex economic calendar for the

next trading week (26.10.2020 – 01.11.2020)**

Trading on key Forex news: next week we are expecting the publication of important macro statistics from Australia, the Eurozone, Germany, the United States, as well as the results of the meetings of the central banks of Canada, Japan, and the Eurozone.

The dollar fell last week. American stock indices also lost a little ground. The DXY dollar index was down about 0.9%, mainly due to the weakening of the dollar against the euro, pound and yen, whose share in the DXY index is about 57%, 12%, and 14%, respectively.

The euro and pound remain under pressure from a sharp increase in the number of coronavirus cases in Europe and the UK, which could result in new tough quarantine measures that restrict economic activity. The pound is also affected by the Brexit situation, and the representatives of the EU and the UK have not yet managed to make progress on the trade deal.

However, the dollar and US stock indices are also under pressure from the uncertainty of the outcome of the upcoming US presidential election.

The focus of investors next week will be on the publication of important macro data from Australia, the Eurozone, Germany, the United States, as well as the meetings of the central banks of Canada, Japan, and the Eurozone.

On the night of October 24-25, European countries switch to winter daylight saving time. In the United States, the clock will be set back 1 hour on November 1.

Traders should pay attention to the publication of the following macro indicators:

*during the coming week, new events may be added to the calendar and / or some scheduled events may be canceled

****** GMT time

Monday, October 26

00:30 AUD Balance of trade

This indicator measures the ratio of Australia’s export and import volumes. Growth in exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. The previous value (August) was AU$ 2.643 billion. A decrease in the trade surplus may negatively affect the Australian dollar.

Tuesday, October 27

09:00 EUR Eurozone Bank Lending Survey

This survey of the state of the bank lending system is carried out by EU financial experts 4 times a year. The main goal of the survey is to obtain expanded information on the conditions of bank lending in the Eurozone. The obtained data are used by the ECB leaders when making decisions on the bank’s monetary policy. This report may cause increased volatility in the euro quotes and on the European stock market at the time of its publication if it contains unexpected conclusions regarding the terms of lending to businesses and households in the Eurozone.

**12:30 USD Durable goods orders. Capital goods orders (ex defense

and aviation)**

This indicator reflects the value of orders received by manufacturers of durable goods and capital goods (capital goods are durable commodities used to produce durable goods and services), involving large investments. Commodities produced in the defense and aviation sectors of the US economy are not included in this indicator. A strong result strengthens the USD. Previous values of the indicator “durable goods orders”: +0.5% in August, +11.7% in July, +7.7% in June, +15.0% in May, -18.3% in April , -16.7% in March, +2.0% in February, -0.2% in January.

Previous values of the indicator “capital goods orders ex defense and aviation”: +1.9% in August, +2.5% in July, +4.3% in June, +1.5% in May, -6, 6% in April, -1.3% in March, -0.6% in February, +0.9% in January.

In theory, the relative growth of the indicator has a positive effect on the dollar; the market reaction to its negative value may be negative for the dollar in the short term. Data worse than the previous value will also negatively affect the dollar quotes.

Forecast for September: +0.7 % (durable goods orders), +0.5% (capital goods ordersex defense and aviation).

It looks like the indicators are declining again after their recovery in previous months from a strong fall in March and April, which may negatively affect the dollar quotes. The slightly better-than-expected data is also unlikely to have a long-term positive impact on the dollar.

Wednesday, October 28 Октября

**01:30 AUD RBA trimmed mean core inflation index (for the 3rd

quarter). Consumer Price Index (Q3)**

This indicator is published by the RBA and the Australian Bureau of Statistics. It reflects the dynamics of retail prices of goods and services included in the consumer basket. The trimmed mean method takes into account the weighted average kernel, the central 70% of the index components. Previous index values: -0.1% (+1.2% YoY) in Q2, +0.5% (+1.8% YoY) in Q1 2020, +0.4% (+1.6% YoY) in Q4, Q3 and Q2 2019. According to the forecast, it is expected that the value of the indicator for the 3rd quarter of 2020 will be +0.1% (+1.4% in annual terms). If the value of the indicator coincides with the forecast or turns out to be worse than it, it is likely to negatively affect the AUD. The data indicate low inflationary pressures in the country. The growth of the indicator should have a positive effect on the AUD in the short term.

The Consumer Price Inflation Index (CPI) published by the RBA and the Australian Bureau of Statistics measures the dynamics of retail prices for goods and services in Australia. CPI is the most significant indicator of inflation and changes in consumer preferences. A high value is positive for the AUD, while a low reading is negative. Previous values of the indicator: -1.9% (-0.3% in annual terms) in the 2nd quarter, +0.3% (+2.2% in annual terms) in the 1st quarter of 2020, +0.7% (+1.8% YoY) in Q4, +0.5% (+1.7% YoY) in Q3 2019. According to the forecast, it is expected that the value of the indicator for the 3rd quarter of 2020 will be at -1.6%. A negative reading is likely to negatively affect the AUD in the short term. If the value of the indicator turns out to be worse than the forecast, it will affect the AUD even more negatively.

**14:00 CAD Bank of Canada’s decision on interest rate. Bank of

Canada’s accompanying statement**

The Bank of Canada will decide on the interest rate. In March, the bank lowered the rate 3 times to the level of 0.25% to mitigate the economic damage from the novel coronavirus pandemic.

In the accompanying statement, the central bank of Canada said that the decision “aims to support the financial system, which plays a central role in lending to the economy, as well as to create a foundation that will allow the economy to return to normal.” The central bank also said in a press release that the spread of the coronavirus and the plummeting global oil prices combined are weighing heavily on Canadians and the Canadian economy.

In fact, quantitative easing and a significant cut in the interest rate should contribute to the weakening of the national currency.

The impact of the coronavirus on the Canadian economy and the country’s labor market (unemployment rose to 7.8% in March from 5.6% in February, while the number of employed fell by 1.01 million people, Statistics Canada said), as well as weak housing market put pressure on the Bank of Canada towards further easing of monetary policy.

However, the Bank of Canada is expected to keep its interest rate at 0.25% at the meeting on Wednesday.

Tough tone of the accompanying statement by the Bank of Canada on rising inflation and the prospects for further tightening of monetary policy will cause the Canadian dollar to strengthen. If the Bank of Canada signals the need for a soft monetary policy, the Canadian currency will decline.

15:15 CAD Bank of Canada’s press conference

During the press conference, the head of the Bank of Canada Tiff Macklem will explain the bank’s position and assess the current economic situation in the country. If the tone of his speech is tough on the monetary policy of the Bank of Canada, the Canadian dollar will strengthen in the foreign exchange market. If Tiff Maclem speaks out for maintaining a soft monetary policy, the Canadian currency will decline. In any case, during his speech, high volatility is expected in the CAD quotes.

Thurday, October 29

**03:00 JPY Bank of Japan’s decision on interest rate. Bank of

Japan’s press conference and comments on monetary policy**

The Bank of Japan will decide on the interest rate. At the moment, the interest rate in Japan is in negative territory, amounting to -0.1%. Most likely, the rate will remain the same. If it is cut and deepens into negative territory, such a decision will cause a sharp decline in the yen on the foreign exchange market and an increase in the Japanese stock market. In any case, during this period of time, a jump in volatility is expected in trading in the yen and in the Asian financial market.

Since February 2016, the Bank of Japan has kept the deposit rate at -0.1%. The target yield for 10-year bonds is currently around 0%. In 2020, the Bank of Japan set an annual target for ETF purchases at 12 trillion yen and expanded its virus-affected business aid program to 110 trillion yen from 75 trillion yen. Under this program, companies can obtain loans without collateral and at a zero interest rate. The goal of the program is to support commercial companies whose bankruptcy rates have skyrocketed in Japan in recent months, including due to the coronavirus pandemic. The recent accompanying statement from the Bank of Japan said that the bank’s management will continue to “increase the monetary base until inflation stays above 2%.” “We will not hesitate to take additional mitigation measures if necessary,” the bank also traditionally said in a statement.

During the press conference, the head of the Bank of Japan Haruhiko Kuroda will comment on the bank’s monetary policy. The Bank of Japan continues to adhere to its super-soft monetary policy. As Kuroda has stated on several occasions, “it is appropriate for Japan to patiently continue with its current loose monetary policy.” Markets usually react actively to Kuroda’s speeches. He will probably touch upon the topic of monetary policy in his speech, which will cause an increase in volatility not only in trading in the yen, but also throughout the Asian and world financial markets.

If the bank’s management decides that the Japanese economy is stable and the momentum of inflation towards the 2% target is not diminishing, they will refrain from changing policy.

06:00 JPY Bank of Japan’s press conference

During the press conference, the head of the Bank of Japan Haruhiko Kuroda will comment on the bank’s monetary policy. Despite the bank’s earlier measures to stimulate the Japanese economy, inflation remains low, production and consumption are falling, which negatively affects export-oriented Japanese manufacturers. Markets usually react actively to Kuroda’s speeches. If he touches on the topic of monetary policy in his speech, volatility will increase not only in trading in the yen, but throughout the Asian and global financial markets.

12:30 USD US Annual GDP for 3rd Quarter (preliminary release)

GDP data is one of the key indicators (along with labor market and inflation data) for the Fed in terms of its monetary policy. Strong result strengthens US dollar; weak GDP report negatively affects the US dollar. In the previous 2nd quarter, GDP declined by -31.4%, after growing by 2.1% in the 3rd and 4th quarters of 2019.

If the data points to another strong decline in GDP in the 3rd quarter, the dollar will be under pressure. Positive data on GDP will support the dollar and US stock indices.

12:45 EUR ECB’s decision on rates

The ECB will publish its decision on the key rate and deposit rate. The ECB’s tough stance on inflation and key interest rates contributes to the strengthening of the euro, while the soft stance and rate cuts weaken the euro. In September 2019, the European Central Bank lowered its key interest rate on deposits by 0.1%, to -0.5% and began buying bonds worth 20 billion euros a month, renewing the so-called quantitative easing program.

In a follow-up press conference, former European Central Bank President Mario Draghi said the balance of risks to the Eurozone’s economic outlook “remains negatively tilted,” implying the possibility of additional stimulus if needed.

The ECB rate cut in September was the first since March 2016, and “until inflation is in line” with the target, which is just below 2%, the rate will remain low. Now inflation in the Eurozone is stubbornly holding around 1%, and the new forecasts of the ECB on rates and the QE program can be seen as a signal of the inclination to further soften policy.

After Brexit, escalating trade conflicts and political instability in the Eurozone are the main threats to the European economy.

Speaking earlier in the European Parliament, Christine Lagarde, who became the new president of the European Central Bank in November, said that the ECB’s monetary policy stimulus continues to have a beneficial effect on the Eurozone economy. “I agree with the ECB Governing Council’s view that a stimulating monetary policy will remain appropriate over a long period of time,” Lagarde said.

An additional factor that may put pressure on the ECB to further ease monetary policy is the coronavirus. Back in March, the ECB signaled the possibility of policy easing, and the bank’s representative admitted that the bank’s management could lower the already negative interest rates even more.

Probably, following the results of this ECB meeting, the key interest rate will remain at the same level of 0%. The ECB’s rate on deposits for commercial banks is also likely to remain at -0.5%. At the same time, it is highly likely that at this meeting the ECB will announce a new program to stimulate the economy.

**13:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany

(preliminary release)**

This index is published by the EU Statistics Office and is calculated on the basis of a statistical method agreed upon between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative one weakens it.

In May, the HICP index (in annual terms) increased by +0.5%, in June by +0.8%, in July - by 0%, in September it decreased by -0.4%. Preliminary forecast for October: -0.2%. The euro is likely to react negatively to the publication of this indicator. If the data turn out to be better than the forecast, the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data indicate that inflationary pressures are still low in Germany. The data worse than the forecast and the previous value will negatively affect the euro.

13:30 EUR Press conference of the ECB

During the press conference, a surge in volatility is possible not only in the euro quotes, but also in the entire financial market, if the ECB leaders make an unexpected statement. Similar previous decisions by the ECB on interest rates and subsequent press conferences have moved the euro rate by 3-5% in a short time. The ECB leaders will assess the current economic situation in the Eurozone and comment on the ECB’s rate decision.

The soft tone of the statements will have a negative impact on the euro. Conversely, the tough tone of the ECB leadership on the central bank’s monetary policy will strengthen the euro.

Friday, October 30

07:00 EUR Retail sales in Germany

Retail sales is the main indicator of consumer spending in Germany showing changes in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast: +0.5% (+4.2% y/y) in October against +3.1% (+3.7% y/y in September, -0.9% (+4.2% y/y) terms) in July, -1.6% (+5.9% y/y) in June, +13.9% and +3.8% (y/y) in May.

The data suggests some improvement in sales indicators, but this is likely to have a strong positive effect on the euro only in the short term, if any.

**09:00 EUR Consumer Price Index. Core CPI (preliminary release).

Eurozone GDP for the 3rd quarter (preliminary estimate)**

Consumer Price Index (CPI) is published by Eurostat and measures the price change of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changing purchasing habits. A positive result strengthens the EUR, a negative one weakens it. In January, the CPI index increased by 1.4% (in annual terms), in February - by +1.2%, in March - by +0.7%, in April - by +0.3%, in May - by +0.1%, and in August it fell by -0.2%, which indicates low inflationary pressure and even a slowdown in inflation. Forecast for September: +0.2% (annualized). If the data turns out to be worse than forecast, the euro may fall sharply in the short term. The data better than the forecast and / or the previous value may strengthen the euro in the short-term, despite the low value (the target level of consumer inflation by the ECB is slightly below 2.0%).

Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy have been excluded from this indicator to provide a more accurate estimate. A high result strengthens the EUR, while a low result weakens it. In January, Core CPI increased by 1.1% (in annual terms), in February - by +1.2%, in March - by +1.0%, in April and May - by +0.9%, and in August - by +0.4%. If the data for September turn out to be worse than the previous value or forecast, it may negatively affect the euro. If the data turn out to be better than the forecast or the previous value, the euro is likely to respond with an increase in quotations, but only in the short term. Inflation in the Eurozone remains low, which is a negative factor for the euro. Forecast for September: +0.7%.

GDP is considered to be an indicator of the overall health of the Eurozone economy. A growing trend in GDP is considered positive for the EUR; a low result weakens the EUR.

Recently, macro data from the Eurozone have been showing a gradual recovery in the European economy after a sharp decline earlier this year. However, the decision made by the EU leaders in July on additional economic support (a package of expenditures for the economic recovery of the bloc in the amount of 1.8 trillion euros was approved) will help stabilize the economy of the Eurozone. At the moment, as a result of quarantine restrictions, restrained spending by companies and consumers, as well as the collapse of exports, the economy is on the cusp of the deepest economic downturn since World War II.

The euro reacted positively to this decision. However, economists forecast that Eurozone GDP will fall by -14.1% in Q3 (-16.9% yoy) after falling by -11.8% (-14.7% yoy) in the 2nd quarter and a decline of -3.6% (-3.1% YoY) in the 1st quarter of 2020.

If the data turns out to be even weaker, the euro could fall sharply. 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 (quarterly growth within 0.2% - 0.4%).

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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