With the central bank meetings out of the way for September, the focus lies purely on data this week. Luckily for traders looking for volatility, there are a number of significant data releases on the docket. The bulk of the potentially market moving data comes out on Thursday, highlighted by the final US GDP revision.
Elsewhere, our focus lies on Spain, where the new budget is expected to be announced as well as an audit of the banking system is due. While we have chosen not to include these events in this week’s article, we believe that there is enough of a chance for them to stoke volatility that we suggest paying attention to the newswires on Wednesday and Thursday especially closely.
09/25 Tuesday // 14:00 GMT: USD Consumer Confidence (SEP)
Consumer confidence has been somewhat tepid in recent months, as a sluggish recovery underscored by a struggling labor market has underpinned disappointment growing among Americans. According to a Bloomberg News survey, the Conference Board’s Consumer Confidence index for September rose back to 63.1 from 60.6, perhaps a sign that the Federal Reserve’s new quantitative easing measures are boosting sentiment. We would like to add in that poll numbers for current US President Barack Obama have also improved in recent weeks, which would necessarily suggest that consumer confidence is improving (if consumers were felling less strongly in their socioeconomic situations, why would they be happier with President Obama?). We expect a strong reading. The key pairs to watch are EURUSD and USDJPY.
09/27 Thursday // 07:55 GMT: EUR German Employment Change (SEP)
The labor markets in Europe have arguably taken the burden of the damage from the sovereign debt crisis, with youth unemployment rates above 50% becoming more common and likely. While the erosion of the labor markets has been sharp in peripheral countries like Greece and Spain, and even core countries like France, to an extent, Germany has thus far been shielded from the worst the crisis has had to offer. That may be starting to change, with 10K jobs projected to have been lost in September. Accordingly, the Unemployment Rate will have been on hold at a record low 6.8%, where it’s been since December 2011. If this figure comes in worse (higher, as it would signal a weaker labor market), expect concerns about the crisis hitting the core to start to grow. The key pairs to watch are EURGBP and EURUSD.
09/27Thursday // 08:30 GMT: GBP Gross Domestic Product (2Q F)
The UK economy has been muddling along, fluctuating between outright recession and stagflation for the better part of the past year-plus. The final revisions to the second quarter of 2012 growth readings will confirm further weakness in one of Europe’s more fragile economies. On a quarterly-basis, the British economy contracted by -0.5%, while on a yearly-basis the economy contracted by the same pace. Thus, there will be no revisions from the second reading of the second quarter figure. Considering this, a beat could push up the Sterling while a miss could derail its recent bull run, amid the renewed discussion of more easing from the Bank of England. The key pairs to watch are EURGBP and GBPUSD.
09/27Thursday // 12:30 GMT: USD Durable Goods Orders (AUG)
Manufacturing activity has been slowing in the United States for the past several months, according to gauges like the ISM Manufacturing index and Manufacturing Payrolls. The August Durable Goods Orders report should confirm this view. According to a Bloomberg News survey, orders dropped by -5.0% on a monthly-basis, after growing by +4.2% m/m in July. Over the course of 2012, orders have dropped by -0.8%; a reading of +0.8% or better would suggest orders growth has been positive in 2012. In line with the disappointing ISM readings of recent, we think that a disappointing reading is very likely. The key pairs to watch are USDCAD and USDJPY.
09/27 Thursday // 12:30 GMT: USD Gross Domestic Product (2Q T)
The US economy trudged along an annualized rate of +1.7%, consensus forecasts show, which means there aren’t any revisions expected to the second quarter GDP figure. This is the final reading – and it has been weak enough already to have spurred the Fed into opting for another round of quantitative easing. While we think there could be a miss in light of some downward revisions across GDP underpinnings, we don’t expect anything beyond +1.5%; and in the event of some fancy accounting, +1.8% to the upside. A print on either side of these bounds will be a significant surprise and could provoke volatility quickly. The key pairs to watch are EURUSD and USDJPY.
Rate Hike Probabilities / Basis-Points Expectations
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--- Written by Christopher Vecchio, Currency Analyst
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