Forex Weekly Outlook: Top 5 Events for August 1-5

ForexNewsNow | Published on July 31, 2011 at 4:08 am

As the world anxiously looks on, US congressional leaders appeared to have made progress on negations to raise the legal US debt limit in order to avoid default during late-night talks in Washington, DC on Saturday, July 30th.

Anonymous sources have been quoted as saying the current plan would have the US debt limit rise by about $2.4 trillion in two stages and would include an approximately equal cut in national spending.

The first debt limit raise would take place immediately in order to avoid the August 2nd deadline set by the Treasury to avoid defaulting on US loan obligations. The second would take place later in 2011. US President Barack Obama has said he would veto any legislation that would require raising the debt limit again before the 2012 elections although he has agreed to Republican demands that deficits be cut without tax increases in exchange for additional US borrowing authority.

Here is a list of additional economic events that may have an impact on the Forex markets this week:

1. US ISM Manufacturing Index (Monthly) – Monday, August 1st 3:00 P.M. GMT – The Institute of Supply Management (ISM) Manufacturing Index tracks the amount of manufacturing activity that occurred in the previous month. It is provided by the Institute for Supply Management.

A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

The previous ISM Manufacturing Index released on July 1st and came out at 55.3, which was positive since the previous forecast was for 51.5. The forecast this month is 56.

The publication of regional surveys currently available suggests a new improvement in US manufacturing activity. Although the Richmond Fed index has deteriorated (from 3 to -1), improved indices in New York (-7.2 to -3.8), Philadelphia (-7.2 to 3.2) and Dallas (5.6 to 10.8) call for an increase of the national ISM manufacturing index from 55.3 to 56 in July.

 

2. AUD Interest Rate Decision (Monthly) – Tuesday, August 2nd, 5:30 A.M. GMT – The Reserve Bank of Australia (RBA) decision on where to set interest rates will depend mostly on the growth outlook and inflation of the country.

A higher than expected rate is positive for the AUD, while a lower than expected rate is negative for the AUD.

According to analysts, the Reserve Bank of Australia will not modify its current interest rate of 4.75%. Moreover, this rate has not been changed since October 2010 (4.50%).

3. US ADP National Employment Report (Monthly) – Wednesday, August 3rd 1:30 P.M. GMT – The ADP National Employment Report measures the monthly change of nonfarm private employment, based on a subset of aggregated and anonymous payroll data that represents approximately 400,000 US business clients. It is released by the Bureau of Labor Statistics.

A higher than expected reading should be taken as bullish for the USD, while a lower than expected reading should be taken as bearish for the USD.

The previous figure released on July 7th was 157K which was quite positive since the previous forecast was for 60K. The forecast this month is 95K.

 

4. Swiss Consumer Price Index (Monthly) – Friday, August 5th 8:15 A.M GMT – The Consumer Price Index (CPI) measures the changes in the price of goods and services and is a key way to measure changes in purchasing trends and inflation in Switzerland. A higher than expected reading should be taken as bullish for the CHF, while a lower than expected reading should be taken as bearish for the Swissy.

The previous Swiss CPI figure released on July 7th was -0.2% which was exactly what analysts had forecasted. The forecast this month is for a figure of -0.5%.

 

5. US Nonfarm Payrolls (Monthly) – Friday, August 5th 1:30 P.M GMT – The Nonfarm Payrolls measures the change in the number of employed people during the last month of all non-farming businesses. In total it accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States.

A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

In the current tumultuous economic times with ongoing negotiations between lawmakers in Washington, DC over raising the US national debt ceiling, the US nonfarm payrolls figures could have a strong impact on the value of the US dollar in the forex markets.

The previous nonfarm payrolls figure released on July 8th was 18K which was very negative since analysts had forecasted 89K. The forecast this month is for a figure of 70K.

 

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