Financial Market Outlook for August 1-5

The Fed and the BOJ didn’t deliver last week as they neither move nor even hint of any prospects of a substantial change to their respective monetary policies. But now all eyes will shift back to the UK as the BOE is expected to change its policy. Also, the NFP report will be another main item to move markets this week. Other reports and events to consider include: GB and China manufacturing PMI, U.S. PCE, RBA’s cash rate, BOE inflation report, U.S. factory orders, Canada’s employment report and U.S. manufacturing and non-manufacturing PMIs. So let’s review the main events for the week of August 1st to 5th.

(All times GMT):

Monday, August 1st

02:00 – China’s Manufacturing PMI: In the previous report, the PMI slipped to 50; current estimates are for the PMI to edge up to 50.1;

09:30 – GB Manufacturing PMI: In the first estimate for July, Great Britain’s manufacturing index dropped to 49.1 – manufacturing is contracting; if this index were to drop even further in the upcoming estimate, this could raise the chances of a rate cut by the BOE this week;

15:00 – U.S. ISM Manufacturing PMI: Back in June, the PMI increased to 53.2 — the manufacturing sector is expanding at a faster rate. And it’s estimated to inch down to 53.1 in the upcoming report, which means the manufacturing sector is expanding and a slightly slower pace;

Tuesday, August 2nd

05:30 – Reserve Bank of Australia – Cash Rate Statement: In the previous meeting, RBA didn’t change its cash rate, which stood at 1.75%. The RBA is expected to slash its rate by 25 basis points to 1.5% — any deviation from this estimate could prompt a reaction for the Aussie dollar;

13:30 – U.S. core PCE: The personal consumption expenditures index is an important indicator the FOMC follows to determine the progress in the U.S. inflation. In the recent report, the core PCE (excluding food and energy) rose by 0.2%. The expectations are for the core PCE to edge up by 0.1%;

Wednesday, August 3rd

13:15 – ADP estimate of U.S. non-farm payroll: ADP will release its estimate for the next U.S non-farm payroll changes for July 2016 that will be published on Friday;

15:00 – U.S. ISM Non-Manufacturing PMI: In June the PMI rallied to 56.5, which shows the non-manufacturing sector is growing at a faster rate. But it’s estimated to slide back down to 56 in the next report – i.e. the non-manufacturing sector is expanding at a slightly slower pace;

15:30 – U.S Crude Oil Stockpiles Weekly update: The EIA (Energy Information Administration) will release its weekly report on the U.S oil and petroleum stockpiles for the week ending on July 29th;

Thursday, August 4th

02:30 – Australia’s Retail Sales: In the recent report for June 2016, retail sales rose by 0.2%; this time the market anticipates a gain of 0.3%;

13:00 –BOE Inflation Report: Bank of England will publish its quarterly report that includes the bank’s inflation outlook for 2016 and 2017;

13:00 – BOE Rate Decision & Asset Purchase Plan: This is the main event of the week that could move markets mainly the British pound and Euro. Currently, the markets expect a rate cut of 25 basis points to bring the BOE’s cash rate to 0.25%; but the market doesn’t price in a major gain to the Asset purchase program, which currently stands at 375 billion pounds. If the BOE decide to cut more than 25 basis points or augment its asset purchase program, this could further weaken the GBP. But it’s also possible to see no major change to policy, which could pull back up the GBP;

13:30 – U.S. Jobless Claims Weekly Report:  This weekly report will refer to the developments in the initial jobless claims for the week ending on July 29th; in the last report, jobless claims increased to 266K; in the next report, estimates are for 265K claims;

15:00 – U.S. Factory Orders: In the last update, factory orders decreased by 1% during June; currently, the market expectations are for another drop of 1.8% in July;

15:30 – EIA U.S. Natural Gas Storage: The EIA weekly report of the U.S. natural gas market will refer to the recent changes in natural gas production, storage, consumption and rates as of July 29th;

Friday, August 5th

01:30 – Reserve Bank of Australia – Monetary Policy Statement: The RBA will publish its quarterly report referring to the Bank’s monetary policy;

08:00 – German Factory Orders: In the previous report, factory orders didn’t change in June; the market estimates that this time factory orders rose by 0.5% in July;

13:30 – Canada’s Employment Report: In the recent employment update referring to June, unemployment edged down to 6.8%; employment declined by 0.7K;

13:30 – U.S. Non-Farm Payroll Update: In the last employment report 287K jobs were added – much higher than expected; the U.S. unemployment rate inched up to 4.9%. The next report is expected to show a lower number (current estimates are at 180K); and wages to keep rising at a monthly rate of 0.2%; if the report beats estimates, this could have a positive impact on the U.S. dollar and lower the concerns of a possible economic slowdown in the U.S.;

For further reading: