Fundamental Analysis by Admiral Markets

[Admiral Markets]

Upcoming Week's Important Economic Data And Events To Watch

Last week, the US economic data remained mixed with disappointing housing, retail sales and industrial production data and, two regional manufacturing surveys, Empire State Manufacturing Index and Philly Fed Manufacturing Index, exceeding expected prints. However, geopolitical concerns in Ukraine and Gaza accompanied with the Fed Chair's semi-annual testimony, indicating the possibilities of the Fed accelerating its plan to hike interest rates should the recent improvement in the US labor market and economic conditions remain on track, drove investors to the traditional safe-haven currencies, the US Dollar and Japanese Yen.

This week, along-with the geopolitical developments, investors will continue focusing on economic data coming out from the US and global economic calendar.

The latest reading on US headline inflation, consumer price inflation (CPI), scheduled for release on Tuesday, is likely to take the center stage. Following its largest monthly increase since May 2013, economists this time expect CPI to register a month-on-month of rise of 0.3%. Meanwhile, the Core CPI (excluding food and energy) is expected to increase by 0.2%. On a year-on-year basis, the CPI is expected to remain above Fed's medium-term target of 2%.

Following last week's surprisingly disappointing US housing data, fresh readings on existing home sales and new home sales will further assist investors to evaluate the health of the US housing sector. Existing home sales for June, scheduled for release on Tuesday, are expected to continue the positive momentum and rise further to an annualized rate of 4.98 million units. Meanwhile, following a strong gain in May, new home sales for the month of June are expected to retreat a bit to a seasonally adjusted annual rate of 485,000 units.

Data pertaining to durable goods orders will be closely scrutinized to support the optimistic views of a faster growth in the second-half of 2014. Durable and core durable goods (excluding transportation items) orders data, scheduled for release on Friday, are estimated to rise 0.4% and 0.6% respectively.

Although, the Fed Chairwoman Janet Yellen has downplayed the concerns over recent rise in inflation, a higher-than-expected inflation reading accompanied with better-than-expected economic data that would strengthen the case of a faster economic growth and surely raise speculations of an earlier-than-expected rate hike by the US central bank. This would also enhance the chances of continuing near-term recovery for the US Dollar.

From UK, minutes from Bank of England's latest monetary policy meeting, retail sales data and preliminary release of UK's second quarter GDP data will be of keen interest for market players and could set the tone for near-term movement for GBP.

Minutes from BoE's latest policy meeting, scheduled for release on Wednesday, could possibly show a growing number of MPC members showing willingness to raise benchmark interest rates. Meanwhile, the first reading of UK's second quarter GDP growth rate, scheduled on Friday, is expected to show the economic growth holding steady and retain 0.8% growth rate. Furthermore, consumer spending, which remains supportive pillar of country's economic recovery, is expected to have remained subdued in June. Experts anticipate retail sales to witness some modest recovery this time, forecasting a rise of 0.2%. A stronger second quarter GDP estimates would reflect UK economy on solid footing and also reinforce the case of the central bank tightening its monetary policy, paving way for a stronger GBP. Furthermore, a high degree of deviation from the expected economic data print could provide the required trigger for GBP to move out of its recent narrow range-bound trade.

Market participants will also be looking for important PMI readings from the Euro-zone along-with German business and consumer climate indices to judge whether region's economic recovery is stalling, which might force ECB to announce further easing measures to stimulate regions economic recovery and to avoid the risk of deflation.

Investors will be particularly focusing on the release of PMI data, a leading indicator of economic health, for both manufacturing and services sector. PMI reading from Euro-zone's two largest economies, France and Germany, along with the broader Euro-zone PMI data for the month of July are scheduled for release on Thursday. The German and broader Euro-zone PMI numbers are expected to continue showing modest expansion, while French PMI data is expected to remain in contraction territory for

In addition to these, German Ifo business climate and Gfk consumer climate, scheduled for release on Friday, could also possibly affect the movement of the common currency, Euro.

Other global economic releases that could possibly impact the moves in the Forex market, especially the Australian Dollar (AUD), includes Australian quarterly CPI data for the quarter ended June 2014, scheduled for release on Wednesday, and Chinese HSBC Flash Manufacturing PMI data, scheduled for release on Thursday. Australian quarter-on-quarter CPI is expected to register a rise of 0.5%, nearly matching with the rise of 0.5% recorded in the previous quarter. This would provide the headroom for RBA to maintain status-quo monetary policy, which could further extend support to AUD.

Meanwhile, following a move back above 50-point level, separating contraction and expansion territory, for the first time in 2014, the Chinese manufacturing PMI is expected to continue showing expanding manufacturing activity at a slightly faster pace. Being Australia's largest trading partner, key Chinese economic data always has a strong impact on the movement of the Australian Dollar (AUD).



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Major Events To Watch In The Week Ahead

Despite of last week’s mixed economic releases from the US, ranging from easing inflation data, slow moving housing sector data (existing and new home sales data) and durable goods orders beating expectations, the US Dollar managed to register yet another week of gains against most major currencies.

Moving forwards, top-tier US economic releases, including the FOMC decision, Non-Farm Payrolls and second-quarter GDP reading, are likely to dominate this week's economic calendar.

The week begins with the release of pending home sales data for the month of June, which is scheduled for release on Monday. Being forward-looking indicator, pending home sales data would provide further clues over the health of the US housing sector. Following a big surge in May by 6.1%, pending sales are expected to register a decline of 0.2% in June.

Market participants prime focus would on US Q2 GDP and NFP data, scheduled on Wednesday and Friday respectively. Wednesday features the first reading of US GDP growth for the second quarter of 2014 and the outcome of the FOMC's two-day meeting. According to the Commerce Department’s final estimates, the US economy shrank by 2.9% annualized rate in the first quarter of 2014. Economists are expecting a strong rebound in the second quarter, with the consensus estimating the advance reading to show an annualized growth of 3.1%.

US Gross Domestic Product (GDP) Graph​

Meanwhile, outcome of the two-day FOMC meeting ending of Wednesday is not expected to deliver any surprise and announce a further tapering of $10 Billion to its monthly bond purchase program. The announcement, however, will be reviewed for any material change to the US economic outlook, which might affect the timing of interest rate hike by the US central bank.

The US labor market report has always been one of the most important economic data and is closely watched by various market participants. Although the number of new jobs addition during July is expected to show a lower rise of 230,000 as compared to 288,000 in June, Friday's jobs reports will still reflect steady improvement in the US labor market conditions. The unemployment rate for July is expected to remain unchanged at 6.1%.

Although, the Fed is not expected to divert from its current dovish outlook, this week’s economic releases will help investors to judge the strength of the US economic recovery and provide some additional insight on the future course of Fed's monetary policy stance.

Moreover, upbeat US GDP and NFP data would better represent the US economic recovery and definitely provide some additional support to the US Dollar in the near-term.

Preceding the official jobs report, ADP report, which shows the number of private-sector jobs addition, would provides an early estimate for the government's report and is scheduled for release on Wednesday. The ADP report is expected to show private-sector employment pick-up in June with the addition of 234,000 new jobs.

Other important economic data featuring this week's US economic calendar include ISM manufacturing PMI data for the month of July and is scheduled for release on Friday. The July PMI data is expected to better the previous readings and come-in at 56.1 from 55.3 recorded in June. Investors will also watch out for Conference Board's consumer confidence index, a leading indicator of consumer spending, for the month of July and is scheduled for release on Tuesday. The index is expected to continue inching higher and rise to 85.5 from 85.2 recorded in the previous month.

The ECB's latest easing measures were aimed at stimulating economic growth and to avoid the risk of deflation by spurring inflation. Hence, economists will remain focused on this week's Euro-zone inflation data, which is scheduled for release on Thursday. Euro-zone inflation for the month of July is unlikely to show any impact of the ECB policy decision and remain sluggish at 0.5%.

Other highlights from this week's economic calendar features the final manufacturing PMI figures for the month of July. Some of the notable PMI releases include the official and HSBC's Chinese manufacturing PMI, and manufacturing PMI from UK, all scheduled for release on Friday.

Summing it all, a positive US economic data and (or) any disappointing data elsewhere could produce a knee-jerk reaction in the Forex market and spark a renewed investor interest to buy the US Dollar.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Gold Prices Weaken Further

Yesterday, Gold prices continued weakening for the fourth consecutive day and are heading for the second monthly decline in last three as the Q2 2014 economic growth numbers from US surpassed market expectations. The yellow metal, which rallied more than 6% during the month of June, is cutting nearly 2.5% in the current month as increased speculation of near term rate hike by Federal Reserve coupled with the improved economic numbers from the US hurt the safe haven demand of the bullion. The silver prices are less damaged, to the tune of nearly 1.6%, as better manufacturing numbers from China supported expectations of increased industrial demand of the metal.

Off-late US economy has started showing better numbers, which in turn supported the US Dollar against majority of its counterparts. The US Dollar Index (I.USDX) which measures the US Dollar against the basket of six currencies is up by 2% during the month of July as improvement in labor market numbers, one of the main components which can cause near-term interest rate hike, caused market players to buy the greenback. Yesterday, Advance estimation of the Q2 2014 GDP tested the 4.0% level after declining 2.9% during the previous quarter due to bad weather conditions. Market players ignored ADP Non-farm Employment Change, early signal for the Friday’s important labor market numbers, which fell behind its market consensus and the previous reading. Even if the Fed Chair, Janet Yellen, in her testimony during the early month, said that interest rate will remain low for a considerable time after completion of asset purchase in October, market keep expecting an early rate hike as the labor market numbers showed constant progress. US FOMC, took place yesterday, well matched the forecast of $10 billion tapering while the FOMC statement signaled the uneasiness to accept Unemployment as the stronger indicator for the US labor market. All eyes are turned on the Friday’s monthly release of labor market numbers which can provide meaningful insights of the US labor market. Although the number of new jobs addition during July is expected to show a lower rise of 230,000 as compared to 288,000 in June, Friday's jobs reports will still reflect steady improvement in the US labor market conditions. The unemployment rate for July is expected to remain unchanged at 6.1%.

Other than the US, rest of the global economy continued witnessing subdued economic signals. The Flash estimation Euro region CPI y/y, published today, became yet another drag for the regional currency as it fell behind the market consensus and previous reading of 0.5% while the Australian Building Approvals plunged to negative region. The UK Manufacturing PMI, scheduled to release tomorrow, is expected to lag behind its previous release and the Japanese unemployment rate and industrial production remained weaker.

Geo-political tensions, which became the main driver of the last monthly rally in yellow metal prices, remained elevated as the Europe and the US kept announcing additional sanctions to Russia for its hand in Ukraine crisis. Moreover, the crisis between Israel and Gaza registered another activity as Israel blasted Gaza’s only power plant recently. The Egyptian mediators are trying to stall the war between these two countries; however, there is no sign of agreement.

Physical demand of the yellow metal signaled mixed results as the Chinese imports via Hong Kong fell to a 17-month low in June to 40.54 tons, from 52.61 tons in May while the Indian imports are likely to deteriorate to 30-40 tons after rallying to nearly 100 tons in the month of June. Gold ETPs ETPs rose nearly 1% to $536.81 million as of July 29, after witnessing a net outflow of $319 million in six months through June.

To sum up, continuous improvement in US labor market numbers kept spurring the speculations relating to early rate hike by Federal Reserve, which in turn supports the greenback prices, a negative for the precious metals. Moreover, the geo-political tensions are supporting the greenback demand rather than its bullion counterpart and the physical demand is also subdued, depicting the overall decline into the precious metal prices.

Looking forward, precious metal prices are likely to jump between gain and loss cycle due to the mixed plays of US Dollar and the physical demand. However, the rate hike signal by the Federal Reserve together with the ease of import norms by India can become decisive for the precious metal prices.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Can US Dollar Add To Recent Gains?


Last week's strong US GDP reading, that showed US economy expanding by 4% in the second-quarter of 2014, raised speculation of earlier than expected rate-hike by the US central bank and boosted demand for the US Dollar. Adding to the US Dollar strength were weaker Euro-zone inflation data and lower-than-expected UK manufacturing PMI data. However, Friday's below expectations NFP data and unexpected rise in the US unemployment rate failed to provide further lift to the US Dollar. Nevertheless, the US Dollar Index (I.USDX), which measures the US Dollar's performance against a basket of other major currencies, registered a third consecutive week of gains.

This week's US economic calendar is relatively quieter, with only ISM non-manufacturing PMI and trade balance data featuring amongst this week’s important releases. The ISM non-manufacturing PMI for the month of July, scheduled for release on Tuesday, is expected to better the previous reading of 56.0 and rise to 56.6. The trade balance data for the month of June is scheduled for release on Wednesday. The trade deficit is expected to marginally shrink further to $44.2 Billion from $44.4 reported for the month of May.

This week's investor's main focus would be on ECB’s monetary policy decision on Thursday. Even as the Euro-zone inflation continues to remain lower persistently, there are little expectations in terms of any fresh easing measures to be announced by the ECB. ECB President Mario Draghi's subsequent press conference will be closely scrutinized for any dovish comments. Should Draghi's comments refrain from any further policy action, it could spark some meaningful recovery for the Euro-zone currency.

The RBA and BoE are also scheduled to announce their monetary policy decisions on Tuesday and Thursday respectively. The announcements are likely to have little effect on the Forex market as the central banks are expected to keep their monetary policies unchanged. However, important economic releases from Australia, China and UK are likely to trigger some volatile moves in the Forex market, especially for AUD and GBP.

The RBA is schedule to release its quarterly Statement on Monetary Policy on Friday. The statement could provide some valuable insights into the central bank's expectations of economic condition and future monetary policy decisions. Also, employment data and trade balance data from Australia along with CPI and trade balance data from China might continue to probe some volatile moves for the Australian Dollar (AUD) in the later part of the week. The Australian employment data for the month of July is scheduled for release on Thursday and is expected to show yet another strong month of job creations. Consensus estimates the number of people employed during the month of July to increase by 13.5K and the unemployment rate to remain unchanged at 6.0%. Australian trade balance data for the month of June is scheduled for release on Tuesday and the deficit is expected to widen further to 2.00 Billion Australian Dollars.

Also watch-out for scheduled Chinese trade balance data on Friday and inflation data on Saturday. Being Australia's biggest trading partner, economic releases from China always has a material impact on AUD.

Any downside surprise, especially from the Australian employment data, could open room for a strong downward momentum for AUDUSD.

Other highlights from this week's economic calendar, that could have some significant impact on the Forex market includes services PMI data and manufacturing production data from the UK. UK services PMI is scheduled for release on Tuesday and expected to continue showing strong expansion in the services sector. The services PMI for the month of July is expected to remain well above the 50 mark at 58.1.

The manufacturing production data, which makes up around 80% of total Industrial Production from UK, is scheduled for release on Wednesday. Following a disappointing negative reading in May, the release for June is expected to show a turnaround in the manufacturing sector with an estimate of 0.7% growth in manufacturing production and 0.6% growth in industrial production.

Following a sharp-reversal from over 5-year highs, lower-than-expected readings would further increase the possibilities of continuing downward momentum for GBPUSD.

Summing it all, although the US economic calendar lacks major releases, but some important market moving announcements from other developed economies are likely to continue providing the required momentum in the Forex market.





“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Global Economic Events To Provide Cues For Forex Traders

Last week, the US Dollar benefited from safe-haven demand led by mounting geopolitical concerns in Ukraine. This accompanied with the US President Barack Obama's approval of targeted air-strikes on Iraq hit investors sentiment and boosted demand for safe-haven assets, including the US Dollar. On the economic data front, the US economy continued showing strength with the ISM non-manufacturing index jumping to 58.7, surpassing expectations, and the trade deficit for the month of June also shrunk more-than-expected to $41.5 billion. Meanwhile, crisis in Ukraine eased on report that Russian troops ended military drills and are returning to base. This capped further upside for the US Dollar. Nevertheless, the overall US Dollar Index (I.USDX) still managed to register a fourth consecutive week of gains.

Although, this week's global economic calendar is relatively quieter but still could provide some cues for traders in the Forex market. This week's important US economic reports include retail sales on Wednesday, empire state manufacturing index, industrial production and UoM consumer sentiment on Friday.

Improving US labor market conditions support the optimistic view that this week's US economic data might continue with its recent positive trend as would be reflected in improving retail sales data for the month of July. Retail sales, scheduled for release on Wednesday, is expected to register a gain of 0.2% in July. While core retail sales (excluding automobiles) are expected to rise 0.4%. Further, supporting the view of positive economic momentum to continue would be the preliminary reading of UoM consumer sentiment, scheduled for release on Friday. Following a lower-than-expected reading in previous three months, the index reading for the month of August is expected to reach 82.7.

Friday’s important releases also include producer price index and industrial production data for the month of July, and empire state manufacturing index for the month of August.

This week's US economic data is unlikely to influence the speculations over US central bank's interest-rate hike decision and thus is unlikely to have any meaningful impact on the market moves.

Apart from the US economic data, notable economic releases from UK, that includes BoE’ quarterly inflation report, UK employment data (claimant count change and unemployment rate) and second estimate of GDP could possibly trigger some volatile moves in the market.

Following its decision to leave its monetary policy unchanged, the BoE is scheduled to release is quarterly inflation report on Wednesday. The inflation report followed by Bank of England governor Mark Carney's press conference could possibly drive and determine the near-term direction for GBP. The BoE's quarterly inflation report reveals central bank's inflation projection and economic growth over the next 2 years.

Meanwhile, UK labor market reports, scheduled for release on Wednesday, is expected to show the number of people claiming unemployment related benefits during the month of July to decline 29.7K. The unemployment rate is expected to drop to 6.4% from 6.5% recorded in the previous month. Market players will also keep a close eye on the release of second estimate of the second-quarter 2014 GDP growth rate, which is scheduled for release on Friday. The preliminary release indicated continuation of UK economic recovery, with GDP expanding by 0.8%. The second estimate of growth for Q2 2014 is expected to remain at 0.8%.

Given the expectations of a rate hike as soon as 2015, disappointing GDP data and (or) change in central bank’s forward guidance language on interest rates, could possibly change the near-term direction for the British Pound (GBP).

Dominant economic data from this week's economic calendar from the Euro-zone is the release of preliminary composite Euro-zone GDP data along-with Euro-zone's two largest economies, Germany and France for the second-quarter of 2014. The flash version of the 17-nation composite GDP, scheduled for release on Thursday, is expected to show a nominal growth of 0.1% and Euro-zone's largest economy, Germany, is expected to have contracted for the first time since fourth-quarter of 2012. France, on the other hand, is expected to have expanded by 0.1%. A lower-than-expected German GDP could wipe off the entire Euro-region growth and could further exert pressure on the common-currency, Euro. The Euro-zone final CPI data, also scheduled for release on Thursday, is expected to confirm subdued inflationary pressure and come-in at 0.4% as reported in the flash estimate. Other key release from this week's Euro-zone economic calendar features the German ZEW Economic Sentiment, scheduled on Tuesday, and industrial production data, schedule for release on Wednesday.

Chinese industrial production for the month of July, is scheduled for release on Wednesday, and is closely scrutinized to gauge economic strength of the world's second-largest economy and for any material impact on commodity currencies including the Australian Dollar. A disappointing Chinese manufacturing data accompanied with the ongoing geopolitical concerns could further extend the ongoing weakness for AUD.

Investors focus will also turn to this week's Japanese GDP data for the second-quarter of 2014, scheduled for release on Wednesday. The preliminary report on the economic activity in Q2 of 2014 is expected to show Japanese economy contracting sharply with consensus forecasting a drop of 1.7% following a healthy growth of 1.6% in Q1. A disappointing GDP reading along with central bank's unwillingness to further ease monetary policy or add stimulus to support economic recovery, is likely to be dominant factor contributing towards weakness for the Japanese Yen (JPY).



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

US Dollar Likely to Hold Recent Gains

Last week, the US Dollar Index (I.USDX), which measures US Dollar's performance against other major currencies, retreated from higher levels on easing geopolitical tensions and mixed economic data. However, following its last week's fractional gain, the index, resumed its strengthening momentum on Monday led by rising home-builder confidence that has raised expectations from this week's housing data from the US.

This week's US housing data for the month of July, which includes the release of government's report on building permits and housing starts along with the latest reading on existing home sales by National Association of Realtors, would provide further insight over the health of the US housing sector. Building permits and housing starts for the month of July are scheduled for release on Tuesday. The number of building permits are expected to rise back to an annualized pace of 1 million units. Meanwhile, the housing starts is also expected to rise, but stay within a striking distance of 1 million units mark, and come-in at an annualized rate of 0.97 million units. Existing home sales for July, scheduled for release on Thursday, are also expected to maintain the positive momentum and the figures are expected to hold above the 5.00 million annualized rate mark.

Events that are likely to take the centre stage this week are the minutes of the Fed's July policy meeting and the US headline inflation data. The minutes from the Fed's meeting held in July will provide insight over the Fed's outlook towards the strength of US economic recovery and consideration of an interest rate hike.

Ahead of the FOMC minutes the US headline inflation data, consumer price inflation (CPI), is scheduled for release on Tuesday and is likely to be watched keenly by market participants. Following its recent trend suggesting firming inflationary pressure, CPI is expected to have risen at a moderate pace of 0.1% in July while core CPI (which excludes volatile food and energy prices) is expected to continue moving higher and increased by 0.2%.

Manufacturing data from this week's US economic calendar includes Flash manufacturing PMI data and Philly Fed Manufacturing Index for the month of August, both scheduled for release on Thursday.

A higher-than-expected inflation reading coupled with Fed's expectation of stable economic outlook and positive economic data would be seen as building the case of a sooner-than expected rate-hike by the Federal Reserve, acting as a catalyst for speculative near-term up-move for the US Dollar.

Apart from the US economic data, minutes from Bank of England's latest monetary policy meeting and UK retail sales data could set the tone for near-term movement for GBP. This accompanied with important PMI readings from the Euro-zone and China could provide the required ingredients to make this week as one of the most volatile weeks in the Forex market.

Last week, BoE hinted towards postponing the first rate-hike should the wage growth continued to remain weak. Moreover, the data released on Tuesday showed UK inflation for the month of July eased further below the BoE's 2% target to 1.6%. This has lowered market expectations of an early interest rate hike by BoE. In view of the recent economic developments, there stands a firm possibility that the minutes from BoE's latest policy meeting, scheduled for release on Wednesday, showing unanimous vote to keep the central bank's interest rates at record low.

Meanwhile, retail sales, which has been a supportive pillar of UK's economic recovery is scheduled for release on Thursday. Economists anticipate retail sales to have recovered in the month of July and are forecasting a rise of 0.4%.

Although the UK economic recovery continues to remain strong, but lowered expectations of the possibilities of an earlier-than-expected rate-hike by the central bank has led to the recent sharp fall for the British Pound (GBP). Hence, any incremental negative news in terms of disappointing economic data is likely to exert additional near-term pressure on GBP.

From the Euro-zone, investors will be particularly focusing on the release of PMI data, a leading indicator of economic health, for both manufacturing and services sector. The flash version of PMI reading for the month of August from Euro-zone's two largest economies, France and Germany, along with the broader Euro-zone PMI data are scheduled for release on Thursday. The German and broader Euro-zone manufacturing PMI figures are expected to continue showing expansion, but at a slightly slower pace, while French manufacturing PMI is expected to continue showing contraction in manufacturing activity. The services PMI numbers are expected to show continuing expansion at a modest pace.

Recent Euro-zone inflation data showed region's inflation dropping further to 0.4%. Moreover, last week's GDP data showed region's largest economy Germany contracting more-than-expected, wiping off the entire regions growth. The combined effect has elevated the risk of deflation and strengthened the case ECB announcing additional monetary stimulus measures to stimulate regions economic recovery. Should this week's PMI figure disappoint, the Euro-zone shared currency - EUR, faces the risk of extending its recent downfall in short to medium-term.


Other global economic releases that could possibly impact the moves in the Forex market include Chinese HSBC Flash Manufacturing PMI data, also scheduled for release on Thursday.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

This Week's Economic Data To Continue Supporting US Dollar


Last week, the US Dollar Index (I.USDX), which measures the US Dollar's performance against a basket of other major currencies, recorded sixth consecutive week of advances supported by better-than-expected housing data and slightly hawkish tone from the minutes of the FOMC meeting in July.

Meanwhile, the Fed chairwoman Janet Yellen's remarks at Jackson Hole late on Friday suggested that the US labor market improvement is turning out to be better-than what was expected by the FOMC, indicating a possible move towards considering a rise in interest rates. However, ECB President Mario Draghi's commented towards adding further stimulus to boost Euro-zone economic recovery. The diverging monetary policy outlook from two of the biggest central banks helped the US Dollar strengthen and continue the momentum at the start of this week.

Moving forwards, with very little in terms of major economic releases from this week's economic calendar, traders will focus on new home sales, durable goods orders, consumer confidence and preliminary GDP data from the US and the very important CPI data from the Euro-zone.

The ECB is scheduled to hold its monetary policy review meeting on Sept. 4, but ahead of that investors will closely scrutinize this week's inflation data, scheduled for release on Friday. The flash version of Euro-zone CPI for the month of August is expected to remain subdued and rise by 0.3%. Meanwhile, the Euro-zone unemployment rate for the month of July, also scheduled for release on Friday, is expected to remain stable at 11.5% recorded in June. Given ECB President Draghi's preparedness to provide additional stimulus, a further drop in inflation seems to force the Euro-zone common currency, Euro, to continue sliding in the near-term.

From the US, the week begins with the release of new home sales data for the month of July, which is scheduled for release on Monday. Following last week's encouraging housing data, economists anticipate the new home sales to have picked-up in July and is expected to reach to a seasonally adjusted annual pace of 426,000 units. Furthermore, a forward-looking indicator, pending home sales data is scheduled for release on Thursday and is also expected to provide further cues over the health of US housing sector. After a higher-than-forecasted decline in June, which was followed by a big surge of 6.1% in May, the data is now expected to show a rise of 0.6% in July.

This week's prime focus from the US would on the preliminary release (second estimate) of US GDP for the second quarter of 2014. According to the Commerce Department's initial estimates, the US economy grew by 4% annualized pace in the second quarter of 2014. Economists are expecting a minor tick-down, with the consensus estimating the reading to show an annualized growth of 3.9%.

Data pertaining to durable goods orders will be keenly watched to further support the optimistic views of a faster growth-trend in the second-half of 2014. Durable and core durable goods (excluding transportation items) orders data are scheduled for release on Tuesday. Orders for durable goods, which also includes transportation items, is expected to jump by 7.4% because of a large orders for Boeing aircraft and core durable goods are predicted to gain 0.5%.

Other important economic data featuring this week's US economic calendar also includes Chicago PMI data for the month of August and revised UoM consumer sentiment, both scheduled for release on Friday.

This week's US economic releases would further help investors to gauge the strength of the US economic recovery. Moreover, upbeat economic data would add to expectations of continuing economic growth in the second half of 2014 and also add fuel to speculations of a change in monetary policy stance by the US central bank. This would ultimately result into the prospects of a stronger US Dollar in medium to long-term.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Gold Prices Maintained Its Downturn

Stronger US Dollar coupled with the weaker physical demand by the largest consumers kept portraying a gloomy face of gold prices which have lost more than 3% during the month of July and are signaling a continuation of downtrend. Additionally, geo-political tensions at Ukraine and Gaza, which have been considered as a supportive factor for the safe haven demand of the yellow metal, are also showing the signs of peace.

US Dollar Index (I.USDX), which tracks the US Dollar against a basket of six currencies, is all set to register its second monthly gain after the minutes of Fed’s July meeting together with the speech by Fed Chair, at Jackson Hole Symposium during last week, signaled that the US Labor market is improving and the policy makers can think of an early rate hike. The speculation is well-supported by the improvement in economic numbers. Recently, the Consumer Confidence Index by the Confederation Board rose to the seven year high while the Durable Goods Orders tested historical high levels. All eyes are turned on the second estimate of Q2 2014 GDP, scheduled to release on Thursday. The initial estimate registered a 4.0% rise into GDP as compared to the negative number in previous quarter. Should the actual number comes near to the initial estimate, the US policy makers have additional support for being hawkish in their September 16-17 meeting.

As per the recent release of World Gold Council’s gold demand trend report, demand statistics of the yellow metal also depicts the reason of gold price decline as the global gold demand in Q2 2014 was 964 tons as compared to 1,148.3 tons in Q2 2013, a nearly 16.00% drop.

Source: World Gold Council

Digging deeper, it can be known that the decline is mainly driven by the largest consumers, namely India and China. Gold demand in India during Q2 2014 dipped 39% as compared to Q2 2013 while that of China dipped 51% during the same period.

Moreover, the recent import numbers from China, via Hong Kong, declined to the lowest level since June 2011 by being at 22 tons for the month of July as compared to 41 tons in June.

Even though the demand statistics showing a pessimistic scenario, it should be noted that the decline from the largest consumers are following seasonal trend and the September, which is generally considered as a buying month for Gold, can fuel the overall demand of the gold for 2014 should these economy continue to improve as per their recent trends.

ETF demand for the yellow metal is also showing the signs of stabilization after heavy liquidation during 2013. However, gold holdings in the SPDR, world’s largest bullion backed ETF fell on Tuesday for a second day.

Recently, Russian President, Vladimir Putin, said that the talks with Ukrainian authorities were “positive” towards the political resolution while the Hamas agreed on Tuesday to an open-ended ceasefire after seven weeks of fighting with their Israel counterparts. Hence, the Geo-political tensions that have been causing uncertainty into the market are about to end which can hurt the safe haven demand of the yellow metal.

On the technical side, the metal prices continued trading near $1300 and are showing signs of dormancy.

Even after the overall scenario of the yellow metal supports more of the downtrend than the reversal, the Federal Reserve meeting in the important month of September together with the on-going talks of peace at Israel and Ukraine can become crucial to determine medium-term scenario of Gold prices.





“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

ECB And NFP To Take The Center Stage

Last week's data from the US showed GDP for the second quarter of 2014 being revised higher to 4.2% annualized rate and consumer confidence index jumped to the highest level since October 2007. Meanwhile, US housing data were mixed but still suggested improving health of the sector. Stronger US economic data accompanied with fading hopes for peace talks between Ukraine and Russia, raising concerns over the ongoing uncertainty surrounding the issue, helped US Dollar to register a seventh week of consecutive gains and second consecutive monthly gain.

With the beginning of a new month, investors gear up for top-tier economic releases, which includes important PMI figure, monetary policy decisions from Australia, Japan, UK ahead of the closely watched US employment reports. The slew of economic releases and escalating conflict between Ukraine and Russia has all the ingredients to trigger a meaningful volatility in the Forex market.

NFP and ECB in focus
The center of attraction from this week's busy economic calendar would be ECB monetary policy decision and the release of NFP data for the month of August, scheduled on Thursday and Friday respectively.

NFP data has traditionally been known for generating substantial volatility in the market. Moreover, recent statement from the Fed Chairwoman Janet Yellen suggest better-than-expected improving US labor market conditions could possibly lead to a move towards considering an earlier hike in interest rates. Hence, this week's US labor market reports would play a major role in fueling rate speculations. Friday's NFP data is expected to continue reflecting steady pace of improvement in the US labor market conditions with anticipated addition of 222K new jobs in August and unemployment rate expected to decline back to 6.1%.

Meanwhile, the latest reading of the Euro-zone inflation showed region's inflation slowing further to a five year low. Moreover, ECB President Mario Draghi's comments at Jackson Hole, hinting towards adding further stimulus, has raised expectations that the ECB might announce some sort of quantitative easing measures on Thursday.

Expectations of an upbeat US NFP data along-with the expectation of a possible quantitative easing program from the ECB would definitely provide some additional support to the US Dollar. Even if the ECB refrains from announcing monetary easing, Draghi's comments on future rate-cut or additional stimulus would continue exerting pressure and drive the common currency, Euro, lower.

Central bank monetary policy decisions

Preceding the ECB monetary decision announcement and NFP data, Bank of England is also scheduled to announce its monetary policy decision on Thursday. Also monetary policy decisions from Australian, Canadian and Japanese central banks are scheduled for announcement on Tuesday, Wednesday and Thursday respectively. Compared to the expected ECB monetary policy announcement, the policy announcements from RBA, BoC, BoJ and BoE, are likely to prove as non-events for the Forex market. However, market player would be keen to see BoJ's evaluation of the recent weaker Japanese economic data as the economy continues struggling to overcome the effects of a sales tax hike introduced in April.

Other important economic releases

From the US ADP report, which shows the number of private-sector jobs addition, is scheduled for release on Thursday and is expected to show an addition of 216,000 new private-sector jobs in August. Meanwhile, better-than-expected economic growth in the US is likely to be supported by this week's ISM manufacturing and non-manufacturing PMI data, which are scheduled for release on Tuesday and Thursday respectively. The ISM manufacturing and non-manufacturing PMI is expected to continue reflecting expanding activity in August with manufacturing index expected to come-in at 57.0 and non-manufacturing index expected to print 57.3. Investors will also have a look at the US trade balance data for the month of July, also scheduled for release on Thursday, and expected to reach $42.5 Billion from the previous reading of $41.5 Billion.

Key data to watch from this week's UK economic calendar UK includes PMI figures for the month of August, i.e. Construction PMI and Services PMI. Tuesday’s key event include construction PMI and release of services PMI is scheduled on Wednesday.

Economic data that could have a material impact on the Australian Dollar AUD, includes PMI figures for the month of August from Australia's largest trading partner, China, and Australian GDP print for the second-quarter of 2014. Chinese PMI figures for the month of August include official and HSBC's services PMI, both scheduled for release on Wednesday. Meanwhile, Australia's second quarter GDP data, also scheduled for release on Wednesday, would be the biggest economic data that could have a lasting effect on AUD. Analysts forecast the data to show economy slowing significantly to register a growth of only 0.4% as compared to 1.1% growth recorded in the first-quarter. Although the currency market already seems to have discounted this slowdown, any significant deviation from the expected print is likely to spark some meaningful move for AUD. Apart from the GDP and Chinese PMI data, watch out for monthly retail sales data and trade balance data, both scheduled for release on Thursday.




“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

US Dollar Poised to Strengthen Further on Scottish Uncertainty

Last week ECB surprised the market by lowering its key benchmark rates by 10 basis points, taking the main refinancing rate to 0.05%, marginal lending facility rate to 0.3% and deposit rate to -0.20%. In addition, ECB also announced fresh quantitative easing measures in terms of purchasing non-financial private sector assets under Asset Backed Securities purchase program and purchasing covered bonds under a new covered bond purchase program. The ECB decision inspired a sell-off for the Euro-zone common currency, Euro, against the US Dollar and other major currencies.

Meanwhile, encouraging ISM manufacturing and non-manufacturing PMI figures accompanied with narrowing trade deficit data from the US provided further strength to the US Dollar. The Dollar, however, retreated a bit on Friday following the release of, what could be termed as disappointing, NFP data for August. Nevertheless, the US Dollar ended the week on a strong note, continuing with its strong momentum and registering eight week of consecutive gains.

The broad based US Dollar rally also had some spilled over effect on other major currencies, except for the Australian Dollar (AUD), which remained firm on the back of stronger Australian economic data and mostly in-line Chinese PMI figures.

As the new week started, the British Pound (GBP) tumbled sharply on uncertainty over Scotland's vote on Sept. 18 on whether to break away from UK. Going forwards, with only retail sales and consumer sentiment data scheduled for release from the US, investors will focus on important economic releases from some other major economies. Here is a brief outlook on some important market-moving events from the upcoming week's economic calendar.

From the US, market participants will particularly focusing on retail sales data, which is scheduled for release on Friday. July retail sales remained flat on a month-on-month basis. However, economists expect retail sales to strengthen in the months to come and are expecting the sales for August to have increased by 0.3% over July, while core sales, which excludes automobile sales, is expected to have increased by 0.2% over previous month. Along with the US retail sales data, preliminary University of Michigan's consumer sentiment index is scheduled for release on Friday. The Preliminary University of Michigan's Consumer Sentiment Index reading is expected to improve from 82.5 in August to 83.2 in September.

Meanwhile, a relatively empty economic calendar from the UK, which includes the release of manufacturing production and trade balance data for the month of July, are scheduled for release on Tuesday. The latest reading for UK manufacturing production data, which makes up for around 80% of total industrial production from UK, is estimated to show a 0.3% growth in manufacturing production and 0.2% growth in industrial production. Also watch-out for the trade balance data, scheduled for release on Tuesday, which is expected to better the previous month's reading, but still remain elevated, and show a trade deficit of 9.1 billion Pounds for the month of July.

With the ongoing uncertainty over Scotland’s independence vote on Sept. 18, GBPUSD currency pair seems unlikely to find any support from the upcoming week's economic releases and remains vulnerable to be suppressed further in the upcoming week.

Dominant Australian and Chinese economic data, that could materially impact the currency market in during the later part of the week include employment data from and CPI, industrial production and retail sales data from China. Key highlight from this week's Australian economic calendar features Australian employment data, scheduled for release on Thursday. Market is expecting the reports to show a strong rebound following a dismal reading in the month of July. Consensus estimate the number of new people employed during the month of August to have increased by 15.2 K and unemployment rate to drop to 6.3% from 6.4% recorded in July. Also watch-out for scheduled Chinese inflation data on Friday and, industrial production along with retail sales data on Saturday.

Since markets do not like uncertainty, the ongoing uncertainty over the highly-anticipated Scottish referendum, coupled with a lack of any major trigger, led by economic releases, is likely to continue supporting the US Dollar in the days ahead.



“Original analysis is provided by Admiral Markets”