Yesterday the Bank of England kept its key interest rate unchanged at 0.25%, but lowered the future growth for 2017 and 2018, which resulted in the immediate depreciation of the British Pound against major pairs, such as GBP/USD which fell from 1.3248 to 1.3110 after the interest rate announcement. However the Bank of England mentioned that future interest rate hikes are still an option to consider, depending on the inflation rate and economic conditions.
Today the forex market will focus on two very important economic announcements, the Canadian and the US unemployment rate and change in employment. There should be expected volatility mainly for the USD/CAD pair, and major other pairs related to the US Dollar.
Here are the most important economic news to focus on today in the forex market for potential trends and price action:
Japan Labor Cash Earnings (June)
Time: 00:00 GMT
This economic report measures the average earnings on a pre-tax basis for employees, and higher readings indicate higher consumer spending power, higher economic growth and potentially higher inflation, being supportive for the Japanese Yen. The expectation is for a reading of 0.5%, slightly lower than the previous reading of 0.6%
Australia Retail Sales Ex Inflation (2nd quarter)
Time: 01:30 GMT
Retail sales show the strength of consumer spending and optimism about the future economic growth, as higher readings show a more optimistic economic outlook for the consumers. Increased Retail Sales can lead to higher inflation rate also due to higher demand for goods and services, so any higher readings are positive for the Australian Dollar. The expectation is for a large increase in the 2nd quarter with a reading of 1.2%, significantly higher than the previous reading of 0.1%.
German Factory Orders (June)
Time: 06:00
This economic reading measures the change of orders and level of demand for industrials products, and higher readings are positive for the German economy and the Euro, reflecting stronger economic spending and growth. The expectation is for an increase in orders on a yearly basis with a reading of 4.4% compared to the previous reading of 3.7%, but for a lower monthly reading of 0.5%, compared to the previous reading of 1.0%.
Canada Unemployment Rate (July)
Time: 12:30 GMT
The unemployment rate is expected to stay unchanged at 6.5% and the Net Change in Employment is expected to be lower in July with a reading of 10k, compared to the previous large increase of 45.3k. Lower readings for the Unemployment Rate and higher readings for the Net Employment Change are positive for the Canadian economy and the Canadian dollar, reflecting a greater percentage of population working, earning and spending, which ultimately results in higher economic growth.
US Non-farm Payrolls and Unemployment Rate (July)
Time: 12:30 GMT
The US Non-farm Payrolls is the economic reading that often sets the trend for the entire month after its release, showing the change in employment excluding the farming sector. Last month the strong positive surprise and large reading of 222k did not help much the US Dollar to appreciate against its major counterparts.
This month the expectation is for a lower reading of 180k, but the Unemployment Rate is expected to decline to 4.3% from 4.4% in the previous month. Any positive surprise in the actual reading of the Non-farm Payrolls will be supportive for the US Dollar, indicating rising employment, a strong labor market and potential inflation pressures as well.
