It’s gonna be another hectic week in the forex market, with a couple of central bank catalysts and the highly-anticipated U.S. NFP release.
Will the RBA keep interest rates unchanged this time? And will the FOMC minutes have any surprises?
Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the closely-watched economic indicators on the calendar this week:
RBA monetary policy decision
On Tuesday (July 4, 4:30 am GMT), Australia’s central bank will be announcing their interest rate decision, which might probably be to keep borrowing costs unchanged at 4.10%.
You see, inflation turned out much weaker than expected in May, so policymakers have enough reason to sit on their hands for the time being.
Then again, jobs data has been beating expectations, with wage growth still putting upside pressure on overall price levels. Another 0.25% hike this month might lead to some intraday gains for the Aussie, but traders are still likely to take future policy expectations into account.
FOMC meeting minutes
By the middle of the week (July 5, 6:00 pm GMT), the spotlight is bound to turn to the June FOMC meeting minutes, as market watchers are keen to find out if more interest rate hikes are in the cards.
Recall that the Fed kept rates on hold at 5.25% last month, marking their first pause after a series of 10 consecutive increases. Still, Fed head Powell reiterated that the next meetings are “live” ones, which suggests that they are keeping the door open for more tightening moves.
The transcript of their latest huddle should provide more clues on how other committee members are leaning, as well as their take on employment and inflation.
Canada’s jobs report
On Friday (July 7, 12:30 pm GMT), Canada will print its June jobs report and probably show a rebound of 22K in hiring after the earlier 17.3K slump. This should be enough to keep the unemployment rate steady at 5.2% for the month.
A larger than expected increase in employment could revive BOC tightening hopes, even after the latest batch of CPI figures disappointed. After all, like most major economies these days, Canada might also be struggling with sticky inflation coming from upside wage pressures.
U.S. non-farm payrolls
Last but certainly not least is the June NFP report due July 7, 12:30 pm GMT, which is slated to show a smaller 222K increase in jobs compared to the earlier 339K gain.
However, it’s worth noting that the U.S. jobs market has consistently surprised to the upside in the past FOURTEEN months, so there’s a pretty good chance we’ll see another strong figure.
If so, Fed rate hike expectations could pick up once more, likely resulting to gains for the dollar. Traders are likely to pay close attention to the average hourly earnings figure, which is projected to show another 0.3% uptick, since this would impact inflation estimates.
Of course leading indicators due throughout the week, including the ISM manufacturing PMI (July 3, 2:00 pm GMT), ISM services PMI (July 6, 2:00 pm GMT), ADP non-farm employment change (July 6, 12:15 pm GMT), and JOLTS job openings (July 6, 2:00 pm GMT) are likely to impact NFP expectations and USD price action.
