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The dollar and its DXY index finished the first half of the year with an growth of approximately 4%. What the second half of the year will be like depends on many factors, primarily on the Fed’s monetary policy. Now many market participants are predicting the first interest rate cut in September. Although, some economists believe that this year the Fed will refrain from easing its policy parameters altogether.
The first week of the 2nd half of the year, the 3rd quarter and July will see the publication of important macro statistics for China, Germany, the US, the Eurozone, Australia, Switzerland, and Canada. The focus of market participants’ attention will, of course, be on the publication on Friday of the monthly report of the US Department of Labor for June.
Note: During the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled. Time is GMT
The article covers the following subjects:
Sunday, June 30
23:50 JPY Tankan Large Manufacturers Index (Q2)
The index reflects overall business conditions for Japan’s major manufacturing companies and is an indicator of the current state of Japan’s export-oriented economy, which is heavily dependent on the industrial sector.
An indicator value above 0 (zero is the middle line) is a positive factor for JPY, and an indicator value below 0 is negative.
Previous quarterly values: 11, 9, 5, 1 (in the 1st quarter of 2023). A relative increase in the indicator will support the yen; a relative decline and especially a move into negative territory will put pressure on the yen.
Monday, July 1
01:45 CNY Caixin Manufacturing PMI
Caixin Manufacturing Purchasing Managers’ Index (PMI) is a leading indicator of the health of China’s manufacturing sector. China’s economy is the second largest in the world, so the release of important macroeconomic indicators from China can have a strong impact on the entire financial market.
Previous values: 51.7, 51.4, 51.1, 50.9, 50.8, 50.8, 50.7, 49.5, 50.6, 51.0, 49.2, 50.5 , 50.9, 49.5, 50.0, 51.6, 49.2 (in January 2023).
A relative decrease in the value of the indicator and a deepening into the zone below 50 may negatively affect the yuan quotes, as well as the quotes of such commodity currencies as the New Zealand and Australian dollars; data better than the forecast/previous values will have a positive impact on them.
12:00 EUR Consumer price indices. Harmonized Index of Consumer Prices (HICP) in Germany (preliminary estimate)
Consumer Price Index (CPI) reflects the dynamics of retail prices of the corresponding basket of goods and services, and the core indicator (Core CPI) does not take into account fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transport, and tobacco products. The ECB’s inflation target is 2%. An increase in the CPI indicator is a harbinger of a rate increase and a positive factor for the EUR.
Previous CPI values: +0.1% (+2.4% in annual terms), +0.5% (+2.2% in annual terms), +0.4% (+2.2% in annual terms), +0.4% (+2.5% in annual terms), +0.2% and +2.9% in annual terms (in January 2024).
If the expected data turns out to be worse than previous values, this will negatively affect the EUR. Data better than previous values will strengthen the euro.
Harmonized Index of Consumer Prices (HICP) is published by the EU Statistics Office and is calculated based on a statistical method agreed 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 result weakens it.
Previous indicator values: +2.8%, +2.4%, +2.3%, +2.7%, +3.1% in January 2024, +3.8% in December, +2.3 % in November, +3.0% in October, +4.3% in September, +6.4% in August, +6.5% in July, +6.8% in June, +6.3% in May, +7.6% in April, +7.8% in March, +9.3% in February, +9.2% in January, +9.6% in December, +11.3% in November, +11.6% in October, +10.9% in September, +8.8% in August, +8.5% in July, +8.2% in June, +8.7% in May, +7 .8% in April, +7.6% in March, +5.5% in February, +5.1% in January 2022 (in annual terms).
Data indicate a renewed rise in inflation in Germany, which, in turn, will put pressure on the ECB to maintain the still fairly tight parameters of its monetary policy. Data weaker than the previous value will likely have a negative impact on the euro. And, conversely, the resumption of inflation growth may provoke a strengthening of the euro. The growth of the indicator is a positive factor for the euro.
If data for June turns out to be better than previous values, then the euro may strengthen in the short term.
14:00 USD US Manufacturing PMI (from ISM)
The US Manufacturing PMI published by the Institute of Supply Management (ISM) is an important indicator of the health of the US economy as a whole. A result above 50 is considered positive and strengthens the USD, a result below 50 is considered negative for the US dollar.
Previous indicator values: 48.7, 49.2, 50.3, 47.8, 49.1 in January 2024, 47.4 in December, 46.7 in November, 46.7 in October, 49.0 in September, 47.6 in August, 46.4 in July, 46.0 in June, 46.9 in May, 47.1 in April, 46.3 in March, 47.7 in February, 47.4 (in January 2023).
The index again moved below 50, indicating a slowdown in this sector of the American economy. The growth of the indicator is likely to support the dollar. If the indicator falls below the forecast and especially below 50, the dollar may weaken sharply in the short term.
Tuesday, July 2
01:30 AUD Minutes of the last meeting of the RB of Australia
This document is published two weeks after the meeting and the decision on the interest rate. If the RBA is positive about the state of the country’s labor market, GDP growth rates, and is also hawkish about the inflation outlook for the economy, markets view this as a higher likelihood of a rate hike at the next meeting, which is a positive factor for the AUD. The bank’s soft rhetoric regarding inflation primarily puts pressure on the AUD.
During the recent (June 2024) meeting, the RBA took a pause again, keeping the interest rate at a 12-year high at 4.35%. However, the RBA signaled the possibility of a further increase if inflation begins to accelerate.
Although annual inflation in Australia slowed in the first quarter of 2024 to 3.6% from 4.1% previously, it is not expected to fall below the Reserve Bank of Australia’s target range of 2% to 3% until 2025. This suggests the central bank will have to keep rates higher for longer than previously expected. However, the leaders of the Australian Central Bank expressed hope that the current restrictive policy will contribute to the return of inflation to target levels in the range of 2.0% – 3.0%.
“Whether further tightening of monetary policy will be required to ensure inflation returns to target within a reasonable time frame will depend on incoming data and evolving risk assessments,” they said.
If the published minutes contain unexpected information regarding the RBA’s monetary policy issues, the volatility in AUD quotes will increase.
09:00 EUR Consumer Price Index. Core Consumer Price Index (preliminary release)
Consumer Price Index (CPI) is published by Eurostat and measures changes in the prices of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changes in consumer preferences. A positive result strengthens the EUR, a negative result weakens it.
Previous values (annualized): +2.6%, +2.4%, +2.4%, +2.6%, +2.8% (in January 2024), +2.9%, +2.4%, +2.9%, +4.3%, +5.2%, +5.3%, +5.5%, +6.1%, +6.1%, +7 .0%, +6.9%, +8.5%, +8.6% (in January 2023), +9.2%, +10.1%, +10.6%, +9.9 %, +9.1%, +8.9%, +8.6%, +8.1%, +7.4%, +7.4%, +5.9%, +5.1% ( in January 2022).
If the data turns out to be worse than forecast, the euro may decline sharply in the short term. Data better than the forecast and/or the previous value may strengthen the euro in the short term. Recall that the ECB’s consumer inflation target is just below 2.0%, and data indicate that inflation in the Eurozone is still high, although there is also a slowing down trend.
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 are excluded from this indicator to provide a more accurate estimate. A high result strengthens the EUR, while a low result weakens it.
Previous values (annualized): +2.9%, +2.7%, +2.9%, +3.1%, +3.3% (in January 2024), +3.4%, +3.6% +4.2%, +4.5%, +5.3%, +5.5%, +5.5%, +5.3%, +5.3%, +5, 6%, +5.7%, +5.6%, +5.3%, +5.2%, +5.0%, +5.0%, +4.8%, +4.3% , +4.0%, +3.7%, +3.8%, +3.5%, +3.0%, +2.7%, +2.3% (in January 2022).
If data for June 2024 turns out to be weaker than the previous value or forecast, this could have a negative impact on the euro. If the data turns out to be better than the forecast or the previous value, the euro will most likely react with an increase in quotations.
Judging by the recently presented data, inflation in the Eurozone accelerated again in the reporting month, and this is a positive (in normal economic conditions) factor for the euro.
Wednesday, July 3
01:30 AUD Retail Sales Index
Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures overall retail sales. The index is often considered an indicator of consumer confidence and consumer spending, also reflecting the health of the retail sector in the near term. Domestic consumption, in turn, is one of the main components of GDP growth in countries with developed economies.
Therefore, a deterioration in this indicator may also indicate problems with the country’s GDP growth in the future. And this, in turn, is a negative factor for the national currency, since a slowdown in the economy may force the national central bank to soften monetary conditions for business, in particular, cut interest rates.
Index growth is usually a positive factor for the AUD.
Previous index value (for April) +0.1% (after -0.4%, +0.3% +1.1%, -2.7%, +2.0%, -0.4%, + 0.9%, +0.3%, +0.5%, -0.8%, +0.8%, 0%, +0.4%, +0.2%, +1.9%, -3.9%, +1.7%, +0.4%, +0.6%, +0.6%, +1.3%, +0.2% in previous months). If the data turns out to be weaker than the previous value, then the AUD may sharply decline in the short term; if it’s above the previous values, the AUD is likely to strengthen.
01:45 CNY Caixin Services PMI
Caixin Purchasing Managers’ Index (PMI) is a leading indicator of the health of China’s services sector. China’s economy is the second largest in the world, so the release of important macroeconomic indicators from China can have a strong impact on the entire financial market.
Previous values: 54.0, 52.5, 52.7, 52.5, 52.7 (January 2024), 52.9, 51.5, 50.4, 50.2, 51.8, 54 ,1, 53.9, 57.1, 56.4, 57.8, 55.0, 52.9 (in January 2023).
Although a value above 50 indicates growth, nevertheless, a relative decrease in the indicator may negatively affect the yuan quotes.
12:15 USD ADP National Employment Report
Typically, the ADP report on private sector employment 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. Another increase in the number of employees in the US private sector is expected in June after an increase of 152 thousand in May, 188 thousand in April, 208 thousand in March, 155 thousand in February, 111 thousand (in January 2024), 158 thousand . in December, 104 thousand in November, 111 thousand in October, 137 thousand in September, 135 thousand in August, 307 thousand in July, 543 thousand in June, 206 thousand in May, 293 thousand in April, 103 thousand in March, 275 thousand in February, 131 thousand (in January 2023).
A relative increase in the indicator can have a positive impact on dollar quotes, while a relative decrease in the indicator can have a negative impact. The market reaction may be negative, and the dollar may decline if the data turns out to be worse than forecast.
Although the ADP report does not have a direct correlation with the official data of the US Department of Labor on the labor market, which will be published on Friday, the ADP report is often its harbinger having a noticeable impact on the market.
14:00 USD US Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. This sector accounts for about 80% of American GDP. The share of production of material goods is approximately 20% of GDP (of which 1% is for agriculture and 18% for industrial production). Therefore, the publication of services sector data has a significant impact on the dynamics of the dollar. A result above 50 is considered a positive factor for the USD.
Previous values: 53.8 in May, 49.4 in April, 51.4 in March, 52.6 in February, 53.4 (in January 2024), 50.5 in December, 52.5 in November, 51 .9 in October, 53.4 in September, 54.5 in August, 52.7 in July, 53.9 in June, 50.3 in May, 51.9 in April, 51.2 in March, 55.1 in February, 55.2 (in January 2023), 49.6 in December, 56.5 in November, 54.4 in October, 56.9 in August, 56.7 in July, 55.3 in June, 55 .9 in May, 57.1 in April, 58.3 in March, 56.5 in February, 59.9 (in January 2022).
Another increase in the indicator should have a positive impact on USD quotes. However, a relative decline in the index, and especially below 50, could have a short-term negative impact on the dollar.
18:00 USD Minutes of the June meeting of the Federal Open Market Committee
The publication of the minutes is extremely important for determining the course of the current Fed policy and the prospects for raising interest rates in the United States. The volatility of trading in financial markets during the publication of the minutes usually increases, since the text of the minutes often contains either changes or clarifying details regarding the results of the last FOMC meeting of the Federal Reserve.
Following the meeting that ended on June 12, 2024, central bank leaders decided to keep the federal funds rate unchanged in the range of 5.25% – 5.50%.
An accompanying statement said the Fed does not believe it would be appropriate to cut rates until there is greater confidence that inflation is moving sustainably toward its 2% target. “The decline in inflation numbers is welcome, but we need to see further evidence that we are returning to target,” and “if necessary, we (at the Fed) are prepared to maintain the current rate for longer,” Fed Chairman Jerome Powell said at the press-conference following the recent meeting.
Market expectations for the Fed’s first interest rate cut have now shifted to September. At the same time, markets still expect two interest rate cuts this year.
A soft tone of the protocol will have a positive impact on stock indices and a negative impact on the US dollar. Tough rhetoric from Fed officials regarding the outlook for monetary policy could push the dollar higher.
Thursday, July 4
US banks and markets are closed to celebrate Independence Day in the United States. Trading volumes during the American trading session will be lower than usual.
01:30 AUD Balance of Trade
The indicator evaluates the relationship between the volumes of exports and imports. Increased exports from Australia lead to a larger trade surplus, which has a positive impact on the AUD. Previous values (AUD billion): May 6.548, April 5.024, March 7.280, February 11.027, January 10.959, December 11.437, October 7.129, September 6.184, August 10.161, AUD 7.324 billion (July), AUD 10.268 billion (June), AUD 10.497 billion (May), AUD 10.454 billion (April), AUD 14.974 billion (March), AUD 14.129 billion ( for February), 10.963 billion Australian dollars (for January 2023). A decline in the trade surplus could have a negative impact on the Australian dollar. Conversely, an increase in the trade surplus is a positive factor for the AUD.
06:30 CHF Consumer price index
Consumer Price Index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the consumer basket. The CPI index is a key indicator of inflation. Its publication causes active movement of the franc in the foreign exchange market.
In the previous reporting month (May), consumer inflation increased by +0.3% (+1.4% in annual terms) after +0.3% (+1.4% in annual terms) in April, 0% (+ 1.2% in annual terms) in February, January 2024 by +0.2% (+1.3% in annual terms), December 2023 by +1.7%, in November by +1.4% and in October by +1.7% (in annual terms).
An indicator value below the forecast/previous value could provoke a weakening of the franc, since low inflation will force the Swiss Central Bank to adhere to a loose monetary policy. Conversely, a strong result will be a bullish factor for the CHF.
Friday, July 5
09:00 EUR Retail sales in the Eurozone
Retail sales are the main indicator of consumer spending showing changes in sales volume in the retail industry. A high result strengthens the euro, and vice versa, a low result weakens it.
Previous values: -0.5% (0% annualized), +0.8% (+0.7% annualized), -0.5% (-0.7% annualized), +0 .1% (-1.0% annualized) in January 2024, -1.1% (-0.8% annualized) in December, -0.3% (-1.1% annualized) ) in November, +0.1% (-1.2% annualized) in October, -0.3% (-2.9% annualized) in September, 1.2% (-2.1% in annual terms) in August, -0.2% (-1.0% in annual terms) in July, -0.3% (-1.4% in annual terms) in June, 0% (-2.4 % annualized) in May, -1.2% (-2.9% annualized) in April, -0.8% (-3.3% annualized) in March, +0.3% ( -2.4% annualized) in February, -2.7% (-1.8% annualized) in January, +0.8% (-2.8% annualized) in December 2022.
The data suggests that retail sales not only have not reached pre-coronavirus pandemic levels after a strong drop in March-April 2020, when strict quarantine measures were in effect in Europe, but are also periodically declining again. However, the better-than-expected data will likely have a positive impact on the euro.
12:30 CAD Unemployment rate in Canada
Statistics Canada will publish data on the country’s labor market for June. Since 2020, unemployment has increased in Canada amid widespread business closures due to coronavirus and layoffs. Unemployment rose from the usual 5.6% – 5.7% to 7.8% in March and already to 13.7% in May 2020.
In May 2024, unemployment was at 6.2% against 6.1% in April and March, 5.8% in February, 5.7% in January 2024, 5.8% in December and November 2023, 5 .7% in October, 5.5% in September, August and July, 5.4% in June, 5.2% in May, 5.0% in April, March, February, January, December, 5.1% in November, 5.2% in October and September, 5.4% in August, 4.9% in July and June, 5.1% in May, 5.2% in April, 5.3% in March, 5 .5% in February, 6.5% in January 2022).
If unemployment continues to rise, the Canadian dollar will decline. If the data turns out to be better than the previous value, the Canadian dollar will strengthen. A decrease in the unemployment rate is a positive factor for the CAD, while an increase in unemployment is a negative factor.
12:30 USD Average hourly wages. Non-farm payrolls. Unemployment rate
These are the most important indicators of the state of the labor market in the US for June.
Previous values: +0.4% in May, +0.2% in April, +0.3% in March, +0.1% in February, +0.6% in January 2024, +0.4% in December and November 2023, +0.2% in October, September and August, +0.4% in July and June, +0.3% in May, +0.5% in April, +0.3% in March, +0.2% in February, +0.3% in January 2023 / 272 thousand in May, +165 thousand in April, +310 thousand in March, +236 thousand in February, +256 thousand in January 2024, +290 thousand in December 2023, +182 thousand in November, +165 thousand in October, +246 thousand in September, +210 thousand in August 2023 / 4.0% in May, 3.9% in April, 3.8% in March, 3.9% in February, 3.7% in January 2024, December and November 2023, 3.9% in October, 3.8% in September and August, 3.5% in July, 3.6% in June, 3.7% in May, 3.4% in April, 3.5% in March, 3.6% in February, 3.4 % in January 2023.
In general, the indicators can be described as positive. However, predicting the market reaction to the publication of indicators is often difficult because many indicators for previous periods may be revised. Now it will be even more difficult as the economic situation in the US and many other major economies remains inconsistent with risks of recession and still high inflation.
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. The most cautious investors might choose to stay out of the market during this period of time.
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 LiteFinance. 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.
