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Forex Market Review – US Data Focus

Pepperstone UUIIFXBR
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A series of high impact data releases out of the US should create some market turbulence this week. The news picks up on Wednesday with the release of three important data points in ADP Employment Change, US Advance GDP and the FOMC Statement. This is followed up by US Non-Farm Payrolls on Friday, and there should be some heightened volatility over these announcements.

US GDP will be quite significant, given that the growth rate of US real GDP was -2.9% in the first quarter of this year. The poor reading to start the year did little to faze markets, as the number was blamed on worse than usual winter weather holding back economic activity. Because of the seasonal interpretation of this negative growth, economists are expecting a strong rebound in economic activity for Q2 of 3.1% due to the delayed activity from Q1 being brought forward to Q2 as weather improved. While it will be some time before the final GDP figure is released, the Advance figure is often the highest impact and can later be revised significantly.

While a strong growth rate is expected, a weak GDP print could be a sign of trouble for the US economy, given that the Federal Reserve is expected to continue removing its QE program over the remainder of the year, and policy intentions of FOMC members are edging towards tightening. Later on in the day, the FOMC gives its statement on monetary policy – as with previous meetings the committee is expected to continue tapering at a pace of 10 Billion this month, with a final decrease of 15 Billion in October. There should not be much surprise if this is the move that the Fed makes, however as always around such policy announcements volatility can be expected.

Outside of the US, Euro Area Flash CPI and Canadian GDP are out on Thursday. Inflation in the Euro Area is expected to remain stable at 0.5% on the announcement of several easing measures in June – Flash CPI has been reported at 0.5% for the last 2 months, after disinflation since 2011 has seen the inflation rate fall from 3%. A print of 0.5% this month could be indicative that the bottom is finally in for the Euro’s slide towards deflation. Canadian GDP is expected to pick up from last month’s read of 0.1%, with analysts forecasting a growth of 0.3% month on month.

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