Forex Weekly Outlook September 9-13

US Unemployment Claims, Retail sales, PPI and Prelim UoM Consumer Sentiment are the highlights of this week. Check out these events and more, on our weekly outlook.

Last week, US Non-Farm Payrolls disappointed with only 169K as employers hired fewer workers than expected in August. The unemployment rate hit a 4-1/2-year low of 7.3% amid a plunge in labor participation rate, reaching its lowest level since the 1970′s. In light of this worrisome release, analysts believe the Fed will refrain from starting its tapering plan this month despite cumulative progress on the economy. Will the US labor market do better in September? 

Let’s Start

1. UK employment data: Wednesday, 8:30. The number of people claiming unemployment benefits continued to drop in July to a four year low, declining by 29,200 after a 29,400 plunge in the prior month, nearly doubling market predictions. Furthermore, the number of people employed increased by 69,000 in the quarter to 29.78 million, the highest since records began in 1971 but unemployment rate remained 7.8%. The Bank of England’s new governor Mark Carney is closely monitoring the employment situation before examining the possibility of a rate hike. UK job market is expected to continue its improvement with a 21,200 fall in the number of unemployed.
2. NZ rate decision: Wednesday, 21:00. The Reserve Bank has maintained the Official Cash Rate (OCR) at 2.5%, as projected, promising to keep rates unchanged through the end of 2013. The central bank warned about the sharp rise in house price inflation in Auckland and Christchurch saying they will monitor its effect on the wider economy. The RBNZ projects a rate hike in March 2014.No change in rates is expected now.
3. Australian employment data: Thursday, 1:30. Australian job market contracted by 10,200 in July, following a 9,300 addition in the previous month. This fall missed predictions for a 6,200 increase. Full-time jobs dropped 6,700 to 8,133,900 in the month while part- time jobs decreased 3,500 to 3,519,300. However unemployment rate remained steady at 5.7% despite the job loss and a 5,700 decline in the number of unemployed. In case the slowdown proceeds, the RBA will have to consider further easing measures to boost the economy. Australian labor market is expected to add 10,200 people and unemployment rate is expected to rise to 5.8%.
4. US Unemployment Claims: Thursday, 12:30. The number of Americans expected applying for unemployment benefits dropped by 9,000 last week to 323,000, indicating the job market is strengthening hand in hand with hiring. This improvement will lead to better wages and help sustain consumer spending, which accounts for about 70% of the economy. Economists expected a higher figure of 332,000. An increase of 332,000 is expected.
5. US Federal Budget Balance: Thursday, 18:00. The US Government increased its budget deficit by $98 billion in July, despite an increase in tax revenues. Healthcare programs, pensions for the elderly and the military drove deficit up. Analysts expected deficit of $96 billion. Even though deficit continues to rise this year, it seems on track to narrow substantially. Deficit  is expected to increase to $155.3 billion.
6. US Retail sales: Friday, 12:30. U.S. retail sales increased by 0.2% in July, following a 0.6% advance in the previous month, suggesting a pick-up in consumer spending. Small businesses were more optimistic in July, despite low inventories. Meanwhile Core sales, excluding automobiles gasoline and building materials jumped 0.5%, posting the largest gain inn five months, indicating households are spending more as the US job market continues to improve. Many economists expect the Fed to begin tapering its purchases as soon as September in light of the strong economic data recently published. US retail sales are expected to gain 0.5%, while core sales are predicted to rise 0.3%.
7. US PPI: Friday, 12:30. U.S. producer prices were flat in July, after a 0.8% rise in the previous month, adding concern that inflation is running too low. Economists expected PPI to advance 0.4%. Meanwhile, Core prices, which are seen as indicators of trends in inflation, rose 0.1% during the month, below the 0.2% gain expected by analysts. Low inflation does not correlate with the strong data released and is a worrisome topic for the Fed before deciding on tapering economic stimulus. A rise of 0.2% is anticipated now.
8. US Prelim UoM Consumer Sentiment: Friday, 13:55. The preliminary reading of the UoM Consumer Sentiment Index for August showed an unexpected decline of 5.1 points to 80, while analysts expected the index to reach 85.6. This indicator is highly regarded by the Fed for its economic outlook evaluation. A rose to 82.6 is forecasted.

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U.S. stocks end flat on Syria concerns, soft jobs report; Dow down 0.10%

U.S. stocks finished Friday largely flat after a volatile session that saw concerns brew over a U.S. standoff with Russia over Syria, while a weak jobs report left the fate of monetary stimulus programs up in the air.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.10%, the S&P 500 index rose 0.01%, while the Nasdaq Composite index rose 0.03%.

The U.S. earlier continued to press its case for military strikes against Syria for its alleged use of chemical weapons, though Russia countered on Friday that it would stand by its ally Damascus in the event of an attack from the West, which spooked investors in equities markets.

While not a major producer of crude, Syria is an ally of oil-rich Iran as well as Russia, and fears persist a U.S. military strike could engulf the entire Middle East and even beyond and threaten global economic stability and send oil prices soaring.

Elsewhere, the U.S. Labor Department reported earlier that the economy added 169,000 jobs in August, less than market calls for a 180,000 increase.

July's figure was revised down to 104,000 from 162,000, while June's figure was revised down to 172,000 from 188,000.

The private sector added 152,000 jobs in August, well beneath expectations for a 180,000 rise. 

The U.S. unemployment rate fell to 7.3% in August from 7.4% in July, as more people left the workforce. Analysts were expecting the unemployment rate to remain unchanged last month.

The data fueled sentiments that the Federal Reserve may hold off on announcing plans to begin winding down its USD85 billion in monthly bond purchases at its Sept. 17-18 policy meeting.

Such stimulus tools weaken the greenback to spur recovery by driving down long-term interest rates, which sends stock prices rising, and talk of the Federal Reserve keeping its asset-purchasing program in place for longer than once expected can bolster stock prices.

Leading Dow Jones Industrial Average performers included Hewlett-Packard, up 1.36%, JPMorgan Chase, up 0.86%, and Alcoa, up 0.64%.

The Dow Jones Industrial Average's worst performers included DuPont, down 0.87%, IBM, down 0.64%, and Verizon, which was also down 0.64%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.89%, France's CAC 40 rose 1.06%, while Germany's DAX 30 finished up 0.49%. Meanwhile, in the U.K. the FTSE 100 finished up 0.23%.

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Forex - Dollar drops on disappointing U.S. August jobs report

The dollar softened against most major currencies on Friday after a disappointing U.S. August jobs report doused expectations for the Federal Reserve to begin tapering stimulus programs this month.

Stimulus programs such as the Fed's USD85 million in monthly asset purchases weaken the dollar to spur recovery, and talk of their staying in place — often the product of disappointing U.S. data — can soften the greenback.

In U.S. trading on Friday, EUR/USD was up 0.45% at 1.3179.

The U.S. economy added 169,000 jobs in August, according to the Bureau of Labor Statistics, less than market calls for a 180,000 increase.

July 's figure was revised down to 104,000 from 162,000, while June's figure was revised down to 172,000 from 188,000.

The private sector added 152,000 jobs in August, well beneath expectations for a rise of 180,000. 

The U.S. unemployment rate fell to 7.3% in August from 7.4% in July, as more people left the workforce. 

Analysts were expecting the unemployment rate to remain unchanged last month, and the jobs report sent the dollar falling by dampening expectations for the Federal Reserve announce at its Sept. 17-18 policy meeting a decision to begin winding down asset purchases.

Soft German data capped the euro's gains.

Germany reported that industrial production in Europe's largest economy contracted by 1.7% in July, well beyond expectations for a 0.5% fall after a downwardly revised 2% increase in June. 

A separate report revealed that Germany's trade surplus narrowed unexpectedly to EUR14.5 billion in July from an upwardly revised June surplus of EUR15.8 billion. Analysts were expecting the trade surplus to expand to EUR16.1 billion in July.

The greenback was down against the pound, with GBP/USD up 0.27% at 1.5632.

Official data released earlier revealed that U.K. manufacturing production rose 0.2% in July,  missing expectations for a 0.3% rise after an upwardly revised 2% increase the previous month. 

A separate report showed that the U.K. trade deficit widened to GBP9.85 billion in July, from a downwardly revised GBP8.17 billion deficit the previous month. Analysts had expected the trade deficit to narrow to GBP8.15 billion in July.

U.K. industrial production came in flat in July, missing expectations for a 0.1% gain, though soft 

The dollar was down against the yen, with USD/JPY down 0.98% at 99.12, and down against the Swiss franc, with USD/CHF trading down 0.75% at 0.9380.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.97% at 1.0403, AUD/USD up 0.69% at 0.9185 and NZD/USD trading up 1.48% at 0.8001.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.60% at 82.18.

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Forex - GBP/USD gains on soft U.S. jobs report, U.K. data weigh

The pound moved higher against the dollar on Friday as investors ditched the greenback after a disappointing U.S. August jobs report doused expectations for the Federal Reserve to begin tapering stimulus programs this month.

Stimulus programs such as the Fed's USD85 million in monthly asset purchases weaken the dollar to spur recovery, and talk of their staying in place — often the product of disappointing U.S. data — can soften the greenback.

In U.S. trading on Friday, GBP/USD was trading at 1.5627, up 0.24%, up from a session low of 1.5565 and off from a high of 1.5681.

Cable was likely to find support at 1.5565, the earlier low, and resistance at 1.5681, the earlier high.

The U.S. economy added 169,000 jobs in August, according to the Bureau of Labor Statistics, less than market calls for a 180,000 increase.

July 's figure was revised down to 104,000 from 162,000, while June's figure was revised down to 172,000 from 188,000.

The private sector added 152,000 jobs in August, well beneath expectations for a 180,000 rise. 

The U.S. unemployment rate fell to 7.3% in August from 7.4% in July, as more people left the workforce. Analysts were expecting the unemployment rate to remain unchanged last month.

The jobs report served as the pair's chief steering current throughout the session, as investors shrugged off sluggish data out of the U.K.

Official data released earlier revealed that U.K. manufacturing production rose 0.2% in July,  missing expectations for a 0.3% rise after an upwardly revised 2% increase the previous month. 

A separate report showed that the U.K. trade deficit widened to GBP9.85 billion in July, from a downwardly revised GBP8.17 billion deficit the previous month. Analysts had expected the trade deficit to narrow to GBP8.15 billion in July.

The pound, meanwhile, was down against the euro and down against the yen, with EUR/GBP up 0.08% at 0.8423 and GBP/JPY down 0.66% at 155.04.

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