Three Things to Watch in the Forex Market This Week: GBP, JPY and USD in Focus
By Joaquin Monfort
• BOJ meeting – Tuesday AM
The Bank of Japan (BOJ) meets on Tuesday morning to discuss and decide monetary policy and is widely expected to change or ‘tweak’ its ultra- loose monetary policy, after reports of rumors leaked from inside the Bank that it was contemplating such a move on Monday.
A change in policy would probably lead to a rise in the Yen as the current ultra-loose stance is weighing down on the currency – the BOJ has loosened as far as it can go so there is only way to go now, and that is tighter, which is likely to support it.
• BOE Meeting – Thursday at 12.00
The Bank of England (BOE) is set to meet on Thursday to decide monetary policy when it is widely expected to raise base interest rates in the UK from 0.5% to 0.75%.
Such a move is likely to yield only limited upside for the Pound, however, as it is already widely telegraphed and lacks the ‘element of surprise’.
The probability of a hike is now circa 80% and this week’s positive data releases so far have helped not hindered expectations.
• Non-Farm Payrolls – Friday 13.30
Despite record high employment in the US, Non-Farm payrolls still has the power to roil markets and pump or burst the Dollar – although it is the average earnings component which is of most interest now.
Economists are forecasting earnings to rise by 0.3% in July from 0.2% in June and to show a static 2.7% rise compared to July last year.
A surprise to the upside would boost the Dollar. Non-Farm Payrolls, meanwhile, is forecast to come out at 195k from 213k previously – anything around the 200k is very good considering the pool of available labor is shrinking all the time.
Tesla Stock Analysts Turn Bears Ahead of Results
By Michael Kramer
Analysts appear to be growing more negative on shares of Tesla Inc. (TSLA), as the electric car maker gets ready to release second-quarter results on August 1. Over the past few weeks, analysts have not only been lowering their revenue estimates and widening expected losses for the coming quarter, but they have also been reducing their price targets. In a sign that perhaps some of the optimism around the stock is beginning to fade.
The company is expected to report a net loss of $2.79 per share, while revenue is seen climbing by 41% to $3.94 billion for the second quarter. All eyes will be on the ramp-up rate of the Model 3 and just how much money the business has left on hand to continue operations.
The price target on the stock has also been steadily falling. Since the start of the year, analysts have reduced their price target on the stock by nearly 7% to an average of approximately $285, almost 5% below the current stock price of around $297.
The Euro-US Dollar Forecast for the Week Ahead
By Joaquin Monfort
The main economic release for the Euro in the week ahead is inflation data out on Tuesday at 10.00 B.S.T.
Inflation data informs European Central Bank (ECB) policymaking, and if it rises the ECB is more likely to end its stimulus programme and start raising interest rates – a move which would be positive for the Euro.
Currently expectations for the first interest rate rise in years at the ECB is priced for the back end of 2019; bring that expectation forward and the Euro will find itself better bid.
Forecasters expect the inflation rate to remain at 2.0% in July and the Core rate to rise to 1.0% from 0.9% in June, on a year-on-year basis. A higher-than-expected rise in inflation, especially core would push the Euro higher.
Another key release for the Euro is Q1 GDP data, out at the same time as CPI, although it is a second estimate so is unlikely to surprise much either way.
Eurozone July PMIs are also scheduled for release during the week, but they too are second estimates so unlikely to move markets.
There are several German releases in the week ahead, including German retail sales in June and Unemployment in July – both out on Tuesday morning.
Gold Weekly Outlook:
The strengthening dollar looks likely to remain a significant headwind for gold this week, ahead of the Federal Reserve’s latest rate setting meeting, where it will probably lay the groundwork for its third rate hike this year in September.
Expectations for higher rates tend to be bearish for gold, which struggles to compete with yield-bearing assets when rates rise, while a stronger U.S. currency makes gold and other dollar-denominated commodities more expensive for foreign investors.
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