Week ahead preview (29 Aug-3 Sep)A busy week ahead as the US jobs report take center focus

Week ahead preview

• Markets are busy in the week ahead with the US jobs report in focus
• Markets will assess the Jackson Hole results
• The NFP, CPI, GDP and Trade balance will be in focus
• Technical analysis

Week ahead

Monday

The markets are fairly quiet to start the week as the economic calendar does not feature key data that could spike volatility in the markets.

The big story will continue to be the Fed decision from the Jackson Hole and the spread of the delta variant. The Oil market has been benefiting from the FDA approval for the use of the Pfizer vaccine as investors believe that mass vaccination can help to minimize the spread of the virus.

The European market will keep its eyes on the Germany consumer price index that could set the tone for the Euro against the US Dollar but there is doubt that the news can spike any volatility as the Fed speech after Jackson Hole can determine the movement for the throughout until next week.

Tuesday

The markets will be fairly busy as the focus turn to the Canada GDP, Germany unemployment and the US consumer confidence will be the key focus in the markets.

China’s August Manufacturing Purchasing Managers’ Index will reflect the impact of the latest Covid19 case that led to the closure of seaports and airports, which will have an impact on trade and industry, as well as tourism and leisure. The markets are eyeing a drop in manufacturing PMI as the economy in China lose steam.

The Germany unemployment data will be the key indicator for the Euro currency as the biggest economy in Europe continue to show signs of recovery after the May shutdown. The unemployment rate has been painting a picture that the economy could be making its recovery. The market expects the data to show a drop of 5.6% in August compared to 5.7% in July. A better than expected data could help lift the Euro movement.

In the eurozone, the most anticipated news is the first inflation forecast for the eurozone in August announced on Tuesday. The market expects an annual interest rate of 2.7%, higher than the 2.2% in July. It is getting farther and farther away from the European Central Bank’s goal of approaching 2%, but it will not exceed it. However, this alone is unlikely to cause the European Central Bank to rethink its current view that price pressures are temporary and that such stimulus policies may continue until next year.

In Canada, the focus will be on the second-quarter GDP.

The new Covid19 containment measures at the beginning of this quarter will affect growth, but due to the very successful vaccine launch plan, the situation has improved in the following months, and we expect growth in the second half of the year to be even stronger.

The US consumer confidence will be the last key data for the day and the indicator has been showing improvement as the economic rebound in the US despite growing concern about the spread of delta variant. The data is expected to show another increase in business confidence and could well be positive for the US dollar.

Wednesday

The US markets will be busy as the Australia GDP and US ADP data will be in focus.

The Australian markets will focus on the GDP data for Q2 and could set the tone for the Australian dollar as it looks for a rebound. The recent lockdown impact will not reflect in the Q2 data. Australia’s GDP in the second quarter should increase 0.7% from the previous quarter, although it was less than 1.1% in the first quarter. But Australia has since re-entered the lockdown, so it did not tell us what happened in the third quarter, and the contraction may resume in the third quarter. When it comes to policy changes, the Reserve Bank of Australia is still on the sidelines, which shouldn’t have much of an impact on the market.

The US ADP employment report will be the key focus on the just right before the ISM data. Markets have already been pricing recovery in the private sector. For June the market expects the private sector to have added 570K jobs in August and a higher than expected data will be positive for the US markets.

The US ISM manufacturing will follow up and given the decline in regional indicators, these numbers are expected to weaken. This is still largely caused by supply chain problems and production bottlenecks because supply cannot keep up with demand. This should mean that inflation readings are still high.

Thursday

The markets are fairly quiet with the Australia trade balance data and Canada trade balance to be the main focus for the day.

The Australian trade balance will be eyed by traders and the news could somehow disappoint due to the recent lockdowns in Australia that has threatened the recovering economy. The data is expected to show a decline and could be negative for the Aussie.

The Loonie will eye the Canada trade balance data and we could expect some positive figures as the mass vaccination program could help uplift their international trading. Any positive data will be key for the Loonie.

Friday

The markets are set to be busy as the US job report is the main focus for the day.

The focus of next week will be the US employment report in August. The Fed is about to announce and begin rolling back the quantitative easing asset purchase plan. If non-farm employment is strong (like 650,000 or more), this can help promote the idea announced on September 22nd and implemented in October. If it’s soft (say 450k or less), it may mean officials would like to see another month of data before choosing to announce on November 3 and roll it out in December. Either way, Fed officials said the US economy is resilient and will be able to withstand the latest wave of Covid cases, so it is likely to shrink this year. More officials also warned that inflation will last longer and financial stability risks associated with rising asset prices.

 After the release of the two 900,000+ figures for June and July, we estimate that the salary data is 720,000, while the general forecast is 750,000.

Technical outlook

The euro hit a new low last week. Although it rallied this week, it still showed a downtrend on the channel chart pattern. The pattern has broken to the upside, indicating a slight change in direction. If volatility breaks the current resistance level, the main resistance levels to watch out for will be the recent highs 1.18065 and 1.18995. Support at 1.17499 will be crucial as a breakout may indicate an acceleration of the downtrend.

LULAMA MSUNGWA

Research & Markets Analyst

Scope Markets