Forex Weekly Outlook October 7-11

The US dollar has been on the back foot due to the government shutdown. FOMC minutes, Draghi’s speech, US unemployment claims and consumer sentiment are the main events. Here is an outlook on the major market movers of this week.

The US government entered a partial shutdown for the first time in 17 years, as politicians in Washington refused to budge from party lines sending 800,000 nonessential workers home. Economic data in the U.S. was mixed with jobless claims remaining low at 308,000, much better than market forecast. The highly important NFP was not released due to the government shutdown. ISM index disappointed, falling to 54.4 from 58.6 ensuring tapering will not start next month. Will the political conflicts be resolved before the US reaches default? In Europe, Draghi didn’t seem worried about falling inflation and in the UK, the pound took a break from rallying despite good data.

Let’s Start

1. US FOMC Meeting Minutes: Wednesday, 18:00. The last meeting was very closely watched. The Federal Reserve was expected to taper bond buys, but surprised markets with deciding NOT to taper. This sent the dollar to the floor. According to some Fed talk, the call was quite close. We will now get to see how close it was, and perhaps receive hints for the next meetings in October and in December.
2. Australian employment data: Thursday, 0:30. The Australian unemployment rate increased to a four-year high in August, reaching 5.8% following 5.7% in June and July, amid an unexpected contraction of 10,800 positions. Full-time employment declined by 2,600, while part-time jobs fell by 8,200. Economists expected a 10,200 job addition in August. An addition of 15,200 jobs is expected  with no change in unemployment rate.
3. UK rate decision: Thursday, 11:00. The Bank of England is not likely to change policy in its October meeting. On one hand, Carney stated that he “does not see a case for more QE” and on the other hand the central bank pledged to keep rates down via forward guidance in August. It is probably too early to make changes now.
   With UK figures remaining upbeat, a rate hike before 2016 certainly seems possible. However, a stronger pound could discourage such a future move.
4. US Unemployment Claims: Thursday, 12:30. US Jobless claims remained low last week increasing 1,000 to a seasonally adjusted 308,000. However the boost in the service sector cooled in September as firms took on fewer new workers. Due to the partial government shutdown, the highly important NFP report was not released. Nevertheless the job market continues to grow with fewer layoffs and increased hiring. A slight drop to 307,000 is projected this time.
5. Haruhiko Kuroda  speaks: BOE Governor Haruhiko Kuroda is intended to speak in Washington DC. Volatility is expected. Kuroda recently said that the current level of monetary stimulus is appropriate.
6. Mario Draghi speaks: Thursday, 13:00. ECB President Mario Draghi is scheduled to speak in New York where he is likely to discuss the Eurozone recovery and his plans for further easing measures to ensure a speedy recovery. Market volatility is expected. In the press conference around the rate decision, Draghi did not seem worried about the falling inflation.
7. Canadian Employment data: Friday, 12:30. The number of Canadian part-time employees increased by 42,000 in August, leading to a 59,200 Job addition. The unexpected rise lowered the unemployment rate to 7.1% from 7.2% in the previous month. However, despite the positive number, the main rise in new jobs was part-time positions held by older workers. The six-month average of job creation has slowed to 12,000. The Canadian job market is expected to add 59,200 jobs and unemployment rate is expected to remain 7.1%.
8. US UoM Consumer Sentiment: Friday, 12:30. Consumer Sentiment in U.S. plunged unexpectedly to 76.8 in September from 82.1 in August, the Lowest since April, indicating consumer spending may take longer to pick up. Economists predicted a rise to 82.6.