The new week on world markets begins with negative dynamics in stock markets of Asia, a decline in crude oil prices and a slight increase in the dollar rate against major currencies, which is clearly manifested in the dynamics of the ICE dollar index.
What do I expect this week?
I believe that the weak data on the number of new jobs in the non-agricultural sector of the US economy released on Friday will stimulate the weakening of the dollar, which is already supported by the super-soft monetary rate of the FedGov. At the beginning of this year, the regulator began to lower interest rates in the uptrend of fears due to the coronavirus pandemic in the United States and announced incentive measures, which then only increased and caused the global fall in the dollar exchange rate, what also stopped since the beginning of September.
Now, it is clear that the US economy is showing a patchy recovery according to the latest data presented, for example, overall economic activity is picking up and the unemployment rate is falling to 8.4% from 10.2% amid low new jobs, the dollar has started to gain support. This is not due to the restoration of his strength but under the influence of two important factors. On one hand, due to its local technical oversold in relation to major currencies, which is most noticeable in the behavior of the ICE index, and on the other hand, the correction that bagan in the American stock market contributes to its appreciation.
So, this week, as before, all investors’ attention will be turned to the publication of fresh economic statistics. It makes no sense to pay attention to the values of Japan’s GDP since the dynamics of the Japanese currency has long been completely dependent on its status as a safe-haven currency. From the European statistics in the center of taking out will be the publication of the values of the volumes of exports, imports and trade balance of Germany, GDP of the eurozone. Any negative numbers of indicators may put forward pressure on the ECB, forcing it to take new measures to support the economy of both Germany, the leader in the euro area, and the eurozone itself. From the US economic statistics, the focus will be on consumer inflation. Its growth is expected to decrease in August in relation to the July figures. And, of course, investors will closely follow the final decisions of the ECB and the Central Bank of Canada. First of all, the decision of the European regulator will be in the spotlight.
It should be noted that today is Labor Day in the United States on Monday. The local financial market is closed.
thoughts and Conclusions
Assessing the likely prospects for dynamics in the Forex market this week, we believe that the general tone and direction of the markets will be given by the ECB meeting and the publication of consumer inflation data in America. If the European Central Bank reports that in the wake of the impact of the pandemic, as well as a weak recovery in economic growth in the region, it can expand stimulus measures – this may become the basis for the continuation of the limited depreciation of the euro against the dollar, which will definitely drag the sterling down. At the same time, the absence of inflation in the United States will negatively affect the dollar exchange rate. A possible downward reversal of Treasury yields will also put pressure on the dollar. Such an interesting configuration may cause the beginning of a general sideways trend in the Forex market, which may drag on even before the meeting of the Fed.