Economic calendar for the week 02.11.2020 - 08.11.2020
2020-11-01
2020-11-01
Economic calendar for the week 02.11.2020 – 08.11.2020Jana Kane
**Review of the main events of the Forex economic calendar for the
next trading week (02.11.2020 – 08.11.2020)**
Trading on key Forex news: next week we expect the publication of important macro statistics from the US, New Zealand, Australia, Eurozone, Canada, as well as the results of the presidential elections in the US and meetings of the central banks of Australia, Great Britain, and the US.
The dollar, which is in demand as a defensive asset, strengthened last week, while US stock indices fell sharply. The DXY dollar index rose 1.3%, mainly due to the weakening of the euro, which accounts for about 57% of the DXY index.
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 the introduction of new strict 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.
American stock indices, in turn, are under pressure from political uncertainty in the United States.
The next week promises to be extremely volatile due to many important events and the publication of important news. The focus of financial market participants next week will certainly be on the US presidential election.
Its outcome will have a huge impact on both the United States and other countries with the world’s largest economies. Donald Trump’s victory will mean maintaining the current trade policy, while Joe Biden is likely to change the tone of trade relations. Biden’s victory could also mean a new injection of money into the economy, which will push the US stock indices up again. This, in turn, will help weaken the dollar. The Fed will continue to adhere to its extra soft policy, and if Biden wins, dollar sales are likely to increase.
In addition, next week, three of the world’s largest central banks (Bank of England, Bank of Australia and the Federal Reserve) will hold their regular meetings and decide on the interest rate. Economists expect central bank governors in Australia and the UK to make changes to the banks’ current monetary policy aimed at further easing it. Unexpected decisions are not off the table, which will cause an additional increase in volatility in the financial markets, and above all in the quotes of the pound, Australian and American dollars.
Investors will also pay attention to the publication of important macro statistics from the US, New Zealand, Australia, Eurozone, Canada, and, above all, the publication of the monthly data from the US labor market, which is scheduled, as always, on the first Friday of the month.
It’s also important to note that on November 1 (Sunday), the United States will turn the clocks back 1 hour.
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, November 2
15:00 USD ISM Manufacturing PMI
The Institute for Supply Management (ISM) Manufacturing PMI is an important indicator of the health of the American economy as a whole. A result above 50 is seen as positive and strengthens the USD, one below 50 as negative for the US dollar. Forecast: 55.6 in October (against 55.4 in September, 56.0 in August, 54.2 in July, 43.1 in May, 41.5 in April, 49.1 in March, 50.1 in February ). The index value is above 50 and not below the previous value, which can support the dollar in the short term. The data above 50 indicates an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator drops below the forecast and the value of 50, the dollar may drop sharply.
Tuesday, November 3
**03:30 AUD RBA’s decision on interest rate. RBA’s accompanying
statement**
In March, the RBA made 2 rate cuts, bringing it to the current level of 0.25%, and launched a quantitative easing program. At the same time, the target level of yield is set at 0.25% for 3-year government bonds of Australia. The RBA has launched a program of lending to the banking system in the amount of at least A$90 billion and intends to buy bonds for A$5 billion.
The negative forecasts of economists suggest that the Australian economy will contract by 6% in 2020, which will be the sharpest annual GDP contraction since the Great Depression of the 1920s. The unemployment rate is likely to rise to around 8.5%.
Some economists have talked about Australia entering its first recession in nearly 30 years, which could turn into a depression.
“We live in extraordinary and difficult times,” said central bank governor Philip Lowe. In his opinion, “further stimulation is needed.” He announced this during a press conference on March 19, when the RBA cut the interest rate during its unscheduled meeting.
Philip Lowe has repeatedly stated earlier that the central bank is ready to lower the rate again if necessary, although the likelihood of introducing negative rates, in his opinion, is “extremely small.”
The main negative factors for the Australian economy are weak wages growth, a weak labor market and a slowdown in growth. Annual inflation has remained below the RBA’s target range of 2-3% for nearly four years.
Unemployment in the country remains above the 5% level for many years, unwilling to decline. Now the coronavirus pandemic has been added to the above negative factors, which has hit the tourism and transport sectors. The RBA also expresses concerns that unemployment may rise to 8%, or even 10%.
It is expected that at this meeting the Central Bank of Australia will lower the rate from the current 0.25% to a new record low of 0.1%, as well as extend the asset purchase program to 5-10-year government bonds. Philip Lowe announced the possibility of such a decision earlier in October, noting also “the need for further fiscal support” from the state.
In an accompanying statement, the RBA executives will explain the reasons for the rate decision. If the RBA signals the possibility of further easing of monetary policy in the near future, the risks of a further fall in the Australian dollar will increase.
13:00 USD The US presidential election
The outcome of the US presidential election will have a huge impact on both the US and other countries with the world’s largest economies. Donald Trump’s victory will mean maintaining the current trade policy, while Joe Biden is likely to change the tone of trade relations. Biden’s victory could also mean a new injection of money into the economy, which will push US stock indices up again. This, in turn, as well as the continued extra soft policy of the Fed, will contribute to the weakening of the dollar. If Biden wins, dollar sales are likely to increase.
When trading during this period, remember that a sharp increase in volatility and a decrease in liquidity are possible in financial markets, accompanied by significant widening of spreads for brokers.
**21:45 NZD Employment rate. Unemployment rate (data for the 3rd
quarter)**
The employment rate reflects the quarterly change in the number of employed New Zealand citizens. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for the NZD, while a low value is negative. Forecast: In the 3rd quarter, the number of employed citizens of New Zealand decreased, and the employment rate fell by -0.8% (against an increase of +0.7% in the 1st quarter of 2020 and a fall of -0.4% in 2 quarter).
Also at the same time, the Bureau of Statistics of New Zealand publishes a report on the unemployment rate - the indicator that estimates the ratio 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 positive for the NZD. Forecast: Unemployment in New Zealand in the third quarter rose to 5.4% from 4.2% in the first quarter of 2020 and 4.0% in the second quarter.
Other indicators of the Bureau of Statistics report are also expected to decline, which is likely to negatively affect the NZD. Worse-than- expected data will have an even stronger negative impact on the NZD.
23:50 JPY Bank of Japan Monetary Policy Committee meeting
At this meeting, the Monetary Policy Committee of the Bank of Japan will once again summarize the results of the previous week’s meeting of the Bank, analyze the economic situation in Japan and give indications of possible further prospects for the Bank of Japan’s financial policy.
If the tone of the minutes of the meeting indicates the firmness of the intentions of the Bank of Japan regarding monetary policy in the country, it will negatively affect the Japanese stock market and strengthen the yen. Conversely, soft rhetoric about the bank’s monetary policy prospects will weaken the yen and boost the Japanese stock market.
Wednesday, November 4
00:30 AUD Retail Sales Index
Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (in September) was -1.5% after falling by -17.7% in April. If the data for October turns out to be weaker than the previous value, the AUD may sharply decline in the short term.
13:15 USD ADP National Employment Report
The ADP National Employment Report usually has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. It is expected that the growth in the number of workers in the private sector in the United States in October was 526,000 (against +749,000 in September). The growth of the indicator should have a positive effect on the dollar quotes.
Therefore, the market reaction may be positive, and the dollar will strengthen if the data is confirmed or turns out to be better than the forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. The bulk of the layoffs were concentrated in tourism and retail. Other important sectors of the economy were also affected. ADP previously reported that the most significant drop in employment was recently observed in the construction and financial services sectors.
While the ADP report does not directly correlate with the official US Labor Department data due Friday, it may fall short of forecasts, pointing to a decline in non-farm jobs instead of an expected 0.700 million new job growth.
If the forecast (+0.700 million new jobs) from the US Department of Labor does not come true, it will indicate a reversal of the current trend in the rate of hiring, while millions of Americans have lost the previously increased unemployment benefits.
15:00 USD ISM Services PMI
This indicator assesses the state of the services sector in the US economy. These services sectors (as opposed to the manufacturing sector) have practically no impact on the country’s GDP.
In September, this indicator came out with a value of 57.8. A result above 50 is seen as positive for the USD. However, a relative decline in the index could negatively affect the dollar in the short term. Outlook for October: 57.8, which is likely to have a positive overall effect on the USD.
Thursday, November 5
00:30 AUD Balance of trade
This indicator measures the relationship between 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. Previous value (August) A$2.643 billion. A decrease in the trade surplus may negatively affect the Australian dollar. The preliminary estimate for September assumed the growth of the trade surplus to A$5.114 billion, which is a positive factor for the AUD.
10:00 EUR Retail sales in the Eurozone
Retail sales is a major consumer spending indicator that shows the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast for September: -1.2% and +2.8% (in annual terms) against +4.4% (+3.7% in annual terms) in August. The data suggests that retail sales have yet to reach pre-coronavirus levels after a sharp drop in March-April, when tough quarantine measures were in place in Europe.
**12:00 GBP Bank of England’s decision on interest rate. Bank of
England’s meeting minutes. Planned volume of asset purchases by the Bank of England. Monetary Policy Report**
In March (11 March and 19 March), during its extraordinary meetings, the Bank of England cut its interest rate twice, bringing it to the level of 0.1%, and announced its intention to purchase UK government bonds in the amount of 200 billion British pounds, in an attempt to counteract economic damage from the coronavirus pandemic. The central bank announced that it would increase its bond portfolio to £645bn, then to £745bn from £445bn at the time. “The current situation is completely unprecedented,” said the new Governor of the Bank of England Andrew Bailey at the press conference after the emergency meeting on March 19. Bailey said he expected a sharp economic contraction due to the coronavirus, and the Bank of England stands ready to take further stimulus measures if necessary. “No, we’re not done yet,” he said. Based on these statements by Andrew Bailey, it is fair to expect further actions from the Bank of England towards easing its monetary policy. It is not impossible that at this meeting on November 5, the Bank of England will increase the volume of bond purchases to 845 billion pounds or lower the interest rate. Although, most economists believe that the Bank of England will refrain from lowering the interest rate for now.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the distribution of votes “for” and “against” raising / lowering the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as with a large current account deficit in the UK balance of payments.
The intrigue about further actions of the Bank of England remains. And in trading the pound and the FTSE100 index, a lot of trading opportunities will be there during the period of publication of the bank’s decision on rates.
Also at the same time, the Bank of England’s report on monetary policy will be published, containing an assessment of the economic outlook. At this time, the volatility in the pound quotes may rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the inflation rate. If the tone of the report is soft, the British stock market will gain support and the pound will decline. Conversely, the report’s tough rhetoric on curbing inflation, implying an increase in interest rates in the UK, will strengthen the pound.
**12:30 GBP Speech by the Governor of the Bank of England Andrew
Bailey**
In his speech, Andrew Bailey, who took over as Governor of the Bank of England on March 16, 2020, replacing Mark Carney, will clarify the bank’s decision on monetary policy. It is likely that he will also touch on the state and prospects of the British economy, which has been badly affected by the coronavirus pandemic and is on the verge of Brexit, which can still go according to the hard scenario.
Participants of financial markets will also expect him to clarify the situation regarding the further policy of the UK central bank. If Andrew Bailey gives any hints about tightening or easing of the Bank of England’s monetary policy in the near future, volatility during his speech will sharply increase in the quotes of the pound and the London Stock Exchange FTSE index. If he does not touch upon the issues of monetary policy, the reaction to his speech will be weak.
**19:00 USD The Fed’s decision on interest rate. The Fed’s comments
on monetary policy**
Following two meetings in March, the Fed sharply cut its interest rate (to 0.25% from 1.75% in February), and also announced the allocation of $700 billion for the purchase of US government bonds and mortgage-backed securities. Subsequently, the Fed has repeatedly announced additional measures to support the American economy and inject cheap liquidity into the financial system. Usually, with the easing of monetary policy, the national currency becomes cheaper and its quotations go down.
In recent months, the dollar has been declining as investors withdrew funds from defensive assets, buying more risky and profitable assets of the stock market, which continued to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset was also declining. However, since the beginning of August, the dollar index has been trading in a range, while the US stock market continues to swing in different directions. And again, the role of the dollar as a defensive asset has been growing lately.
The rate is widely expected to remain at 0.25% at this meeting. At the end of May, the US Federal Reserve Chairman Jerome Powell said that he was “satisfied with the current situation and the path we (at the Fed) are now heading.” “We are not close to any of our limits,” - said Powell, making it clear that the Fed intends to continue to support the economy. Other Fed leaders have also repeatedly stated that they are in favor of continuing the policy of supporting the American economy.
Nevertheless, during the period of publication of the decision on the rate, volatility may sharply increase throughout the financial market, primarily in the American stock market and in the dollar quotes, especially if the decision on the rate differs from the forecast or unexpected statements are received from the Fed leaders.
Powell’s comments may affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious position is seen as negative for the USD. Any hints of the possibility of raising the interest rate will cause the dollar to strengthen and the American stock markets to fall.
Investors want to hear the plans of the Fed for this and next year.
19:30 USD FOMC press conference
The press conference of the US Federal Open Market Committee lasts about an hour. The first part reads the ruling, followed by a series of questions and answers that can increase market volatility.
Powell’s comments may affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious position is seen as negative for the USD. Any hints of the possibility of a change in the current monetary policy will cause an increase in volatility in the dollar quotes and in the American stock market.
Friday, November 6
00:30 AUD RBA’s comments on monetary policy
The Monetary Policy Commentary provides an overview of economic and financial conditions and an assessment of risks to financial stability and sustainable economic growth. The overview a kind of guideline for defining the RBA’s monetary policy plans. A tougher stance on the RBA’s monetary policy is seen as positive and strengthens the Australian dollar, while a more cautious stance is seen as negative for the AUD.
**13:30 USD Average hourly wages. Non-Farm Payrolls. Unemployment
rate**
The most important indicators of the state of the labor market in the United States in October. Forecast: +0.2% (against +0.1% in September, -1.2% in June, -1.0% in May, +4.7% in April) / +0.700 million (against +0.661 million in September, +1.763 million in July and -20.687 million in April) / 7.7% (against 7.9% in September, 13.3% in May and 14.7% in April), respectively.
In general, the indicators cannot yet be described as positive, but they are quite understandable due to mass layoffs in American companies and the closings of offices and shops due to the coronavirus pandemic. At the same time, the data indicate a gradual improvement in the US labor market after its collapse in previous months at the beginning of the year. Prior to the coronavirus, the US labor market remained strong, signaling the stability of the American economy and supporting the dollar.
It is often difficult to predict the market reaction to the publication of indicators. many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, because the economic situation in many other large economies is no better. In any case, when data from the US labor market is published, a surge in volatility is expected in trading not only in the USD, but throughout the entire financial market. Probably the most cautious investors will choose to stay out of the market during this time frame.
13:30 CAD Unemployment rate in Canada
Statistics Canada is to publish data on the country’s labor market for October.
Unemployment has risen in Canada in recent months, including amid massive business closures due to coronavirus and layoffs. Unemployment rose from the usual 5.6% - 5.7% to 7.8% in March and to 13.7% in May. If unemployment continues to rise, the Canadian dollar will decline. If the data is better than the previous value, the Canadian dollar will strengthen. A decrease in the unemployment rate is a positive factor for the CAD, an increase in unemployment is a negative factor. It is expected that in October unemployment was at 9.7% (after 9.0%, 10.2%, 10.9%, 12.3%, 13.7%, 13.0% in the previous months).
**14:00 CAD Speech by the Governor of the Bank of Canada Tiff
Macklem**
Tiff Macklem took over as Governor of the Bank of Canada after Stephen Poloz, becoming Chairman on June 3, 2020. Macklem faces essentially the same tasks as his predecessor in this post.
The Canadian economy, as well as the entire global economy, is showing signs of a slowdown in the first half of this year, driven by the downturn in business due to the coronavirus pandemic. Earlier this year, Stephen Poloz said that the Canadian economy is robust enough to keep rates unchanged despite the worsening global economy. However, the situation is changing rapidly, and not for the better. It will be interesting now to hear Maclem’s opinion on the sustainability of the Canadian economy and the monetary policy of the central bank.
If Tiff Macklem touches on the topic of the monetary policy of the Bank of Canada, the volatility in the quotes of the Canadian dollar will rise sharply. His tough tone will help strengthen the Canadian dollar. The soft rhetoric of Macklem’s speech and the intention to pursue soft monetary policy will negatively affect the CAD quotes.
Probably, he can also provide some guidelines for investors on the eve of the next meeting of the Bank of Canada, which will be held on December 9.
Price chart of GBPUSD 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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