Forex Weekly Outlook September 2-6

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US Manufacturing and Non-manufacturing PMI’s, Trade Balance and a number of Employment releases including the all-important NFP event on Friday; Rate decision in Australia, Canada, Japan, UK and the Eurozone. Check out these events and more, on our weekly outlook.

Last week, US GDP for Q2 was revised up to 2.5% indicating the US economy grew stronger than thought. Increased exports and lower imports, consumer spending and real estate transactions boosted the second quarter numbers. Moreover, Jobless claims, another good indicator for the US recovery remained near a 5-year low with 331K from 337 K in the preceding week, indicating fewer layoffs and steady job gains. Will the US march forward in the coming months?

Let’s Start

• Australian rate decision: Tuesday, 4:30. Australia’s central bank cut its cash rate by 0.25% in August to a record low of 2.5%, in line with market expectations. RBA members voted to ease monetary policy further to prevent a downturn following the mining boom era. No change in rates is expected.
• US ISM Manufacturing PMI: Thursday, 14:00. US Manufacturing sector expanded in July reaching a two-year high of 55.4 compared to 50.9 in June. The reading was above the 52.1 forecasted. The growth in orders indicated companies are more optimistic about US economy. This is also a good sign for the Fed anticipating a pick-up in growth at the second half of 2013. A small drop to 54.2 is forecasted.
• Australian GDP: Wednesday, 1:30. Australia’s economy expanded for the second consecutive quarter, rising 0.6% following the same gain in the previous quarter. However the growth rate was lower than the 0.8% increase expected. It is hard to anticipate the market reaction to the culmination of the mining investment boom. A gain of 0.6% is anticipated now.
• US Trade Balance: Wednesday, 12:30. The U.S. trade deficit contracted sharply in June to its lowest level in more than 3-1/2 years dropping 22.4% to $34.2 billion amid a 2.5% fall in imports reversing the pick-up in the previous month. Economists expected deficit to narrow only to $43.1 billion in June. Trade deficit is expected to reach -38.6 billion this time.
• Canadian rate decision: Wednesday, 14:00. The Bank of Canada maintained its benchmark interest rate at 1.0% due to sluggish economic growth, weak inflation and lower household spending; however the bank made it clear that its next move will be a rate hike. The BOC reiterated its April forecast expecting inflation to rise to its 2 percent target by mid-2015. No change is forecasted.
• Japan rate decision: Thursday. The Bank of Japan did not approve further easing measures in its August meeting, but voted to maintain its minimum low interest rate at 0-0.10%, leaving its asset purchase program unchanged. Despite uncertainty in Europe and in China, Japan’s economy is enjoying a boost from reconstruction activity following last year’s quake, tsunami and nuclear accident. However Japanese exporters are having a rough time due to lackluster demand in foreign markets. In case global economy will not pick-up, the BOJ may miss its target of beginning recovery by September. Rates are expected to remain unchanged.
• UK rate decision: Thursday, 11:00. Bank of England members voted against further stimulus measures in their August meeting, despite Britain’s double-dip recession. The Bank’s Monetary Policy Committee maintained its interest rates at 0.5% and left quantitative easing at £375bn in line with market expectations. The BOE also said it would consider a rate cut after realizing the impact of the Government’s £80bn lending scheme. The same rate is expected now.
• Eurozone rate decision: Thursday, 11:45. The European Central Bank kept interest rates at a record low of 0.5% on their August meeting, confirming that they will remain low for quite some time and may even fall further in order to support the Euro-area gradual recovery. However Draghi’s “forward guidance” policy is not dependent on economic threshold the way it was done in the US. No change in rates is forecasted.
• US ADP Non-Farm Employment Change: Thursday, 12:15. ADP release showed the US economy added 200,000 non-farm private jobs in July beating predictions for a 179,000 increase. The three month average of jobs gain edged up. The majority of jobs were created by small and medium sized business, indicating the US economy continues to strengthen.181K
• US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits remained near a five- year low last week, at 331K, indicating fewer layoffs and steady job gains. However the pace of job creation is not enough to create sustainable growth.330K
• US ISM Non-Manufacturing PMI: Thursday, 14:00. The U.S. services sector registered a major improvement in July, soaring to 56 from 52.2 in the prior month, beating market forecast of a 53.2 reading. The new orders index climbed to 57.7 last month from June’s 50.8 reading. 55.2
• Canadian employment data: Friday, 12:30. Canadian economy shed an unexpected 39,400 number of jobs in July, following a small decline of 400 jobs in the previous month, pushing the jobless rate up to 7.2% in July. The majority of job losses occurred in the public sector were 74,000 jobs were cut. However this decline could be attributed to a drop-off in the summer job market for students. A job gain of 30,200 is expected while unemployment rate is forecasted to remain at 7.2%.
• US Non-Farm Employment Change and Unemployment rate: Friday, 12:30. U.S. employers reduced their pace of hiring in July to 162,000 from 184,000 in June, but the jobless rate declined regardless reaching 7.4%. The reading was below market consensus, but overall hiring was steady in recent months which could indicate an improvement in the US job market. However, with two contradicting outcomes it is hard to point which direction would the job market take. US economy is expected to add 181,000 new jobs with n change in unemployment rate.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.

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