Forex Weekly Outlook September 8-12MAJORS, US DOLLAR FORECAST

The US dollar had another strong week in currency markets, bowing only to the Aussie, as the euro and the pound were hit hard. Can we expect a correction or continuation now? US retail sales and consumer sentiment, Australian employment data and a rate decision in New Zealand are among the major events on our calendar for this week. Here is an outlook on the main market-movers coming our way.

The star of the week was Mario Draghi: the ECB surprised with further rate cuts and also announced a significant ABS program. This sent EUR/USD down over 200 pips to long uptrend support, a move unseen in a long time. In the US, Non-Farm Payrolls disappointed with a gain of only 142K, breaking a winning streak, but this was shrugged off by the mighty dollar. The US economy has seen strong signs of late. In the UK, fears of a Yes vote in the Scottish referendum joined the greenback’s strength to send cable down. Strong Australian GDP, among other events kept the Aussie resilient once again. Some hopes for peace in Ukraine were unhelpful for the yen, that reached a multi-year low against the dollar. Will the action continue?

Updates:

1. Mark Carney speaks: Tuesday, 8:30. BOE Governor Mark Carney will speak in Liverpool and may speak about his intentions to raise rates before wages increase. The International Monetary Fund expects U.K. growth to soar this year. However wage growth is not expanding according to projections. Carney stated that the banks have made “substantial progress” in returning to normal and the expansion trend is gathering momentum.
2. US JOLTS Job Openings:  Wednesday, 14:00. The measure of job openings is watched closely by the Federal Reserve for longer term employment trends, despite the fact that it is lagging: we now get the figure for July, not for August like the NFP. A rise from 4.67 seen in June to 4.72 is expected now.
3. New Zealand Rate decision: Wednesday, 21:00. The Reserve Bank of New Zealand raised its official Cash Rate to 3.5% in July from 3.25% in the previous month. This was the fourth hike in five months amid a growth trend in the economy. The rise was in line with market forecast but economists believe this was the last rise in this hike series, after which the Bank will assess the tightening measures impact on the economy. The Reserve Bank has previously announced another rate hike of 1.25% by the end of 2014 and 2015 reaching a ‘neutral’ level of 4.5%. The bank said the economy was expected to expand at an annual pace of 3.7% in 2014. No changes are forecasted this time.
4. Australian employment data: Thursday, 1:30. Australia’s unemployment rate soared to a 12-year high of 6.4% in July from 6.0% in the previous month while economists expected the rate to remain at 6.0%. The economy contracted 300 jobs following a 15,900 job addition in June. Full-time positions increased by 14,500 while part-time roles declined 14,800. The participation rate, increased by 0.1% to 64.8%. Economists believe this decline is only a temporary glitch reflecting the volatility of month-to-month data. Australia’s job market is expected to gain 15,200 jobs while the Unemployment rate is expected to decline to 6.3%.
5. US Unemployment Claims: Thursday, 12:30. The number of jobless claims increased by 4,000 last week to 302,000, a bit higher than the 300,000 expected by analysts. The four-week moving average of initial claims edged up 3,000 last week to 302,750. The level of continuing claims declined by 64,000 from the previous week and the level of unadjusted continuing claims fell by 95,339 to 2,306,286. Overall, the level of claims last week was well below the 4,388,758 posted a year ago. Jobless claims are expected to increase by 306,000.
6. Haruhiko Kuroda speaks: Friday, 6:05. BOJ Governor Haruhiko Kuroda will speak at the National Graduate Institute for Policy Studies in Tokyo. He may talk about the central bank’s intentions to raise the sales tax again in order to narrow government deficit. Kuroda remained optimistic about pulling out of deflation and reaching the 2% inflation target. BOJ Governor is also positive that Japan’s economy will continue to expand in the months ahead.
7. US Retail sales: Friday, 12:30. U.S. retail sales unexpectedly halted in July, remained unchanged from June, suggesting some loss of momentum in the economy at the beginning of the third quarter. However gob growth continued to be positive, indicating sales activity is bound to strengthen in the coming months. The main fall occurred in the automobile sector declining 0.2% after a 0.3% fall. Meanwhile, core retail sales, excluding automobiles, gasoline, building materials and food services inched up 0.1% in July. Retail sales are predicted to increase 0.3% while core sales are expected to gain 0.2%.
8. US UoM Consumer Sentiment: Friday, 13:55. According to the first read, American consumer confidence unexpectedly dropped in August to a nine-month low of 79.2 points from 81.8 points in July, missing predictions for a reading of 82.7. However, this was later revised to the upside, with the final figure set at 82.5 points, more in line with the strong CB Consumer Confidence. American consumer confidence  is expected to pick-up to 83.2 this time.