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FX Week Ahead - Top 5 Events: Chinese & US Manufacturing PMIs; Eurozone Inflation; US NFP & Unemployment Rate; US Holiday

FX Week Ahead - Top 5 Events: Chinese & US Manufacturing PMIs; Eurozone Inflation; US NFP & Unemployment Rate; US Holiday

Christopher Vecchio, CFA, Senior Strategist

FX Week Ahead Overview:

  • The final days of June and first days of July bring forth a mixed macro calendar: not many high rated events and a market holiday in the US for the federal holiday.
  • Even though US financial markets have a half day on Friday, July 2, the June US NFP report will be released, allowing traders to gauge the state of the US labor market recovery.
  • Overall, recent changes in retail trader positioning suggest that the US Dollar has a mixed bias.

For the full week ahead, please visit the DailyFX Economic Calendar.

06/29 TUESDAY | 21:00 GMT | CNY NBS Manufacturing PMI (JUN)

There are signs emerging that the world’s second largest economy is beginning to cool off. China’s credit impulse (growth in credit as a percentage of Chinese GDP) has started to fade, which has historically aligned with weaker PMI readings. Indeed, the upcoming data release is due to show that China’s manufacturing sector is still growing, but as a slower pace. According to a Bloomberg News survey, the June China NBS manufacturing PMI is expected to cross the wires with a reading of 50.8, down from the 51.0 reading in May. Even a slight deceleration in Chinese PMI readings may prove problematic for major currencies like the Australian and New Zealand Dollars.

06/30 WEDNESDAY | 05:00 GMT | EUR Inflation Rate Flash (JUN)

The flash June Euroarea inflation rate (CPI) report is the top item of interest for the Euro this week alongside ECB President Christine Lagarde’s speeches on June 29 and July 1. The inflation data are due midweek, and according to Bloomberg News, the headline Euroarea inflation reading is due in at +1.9% from +2.0% (y/y), while the core reading is due in at +0.9% from +1.0% (y/y).

With inflation expectations have dropped the past few weeks – since their yearly high on May 18 at 1.643%, the 5y5y inflation swap forwards have declined by -7-bps to 1.575% – it appears that the ECB will continue to beat the drum of ‘lower for longer,’ which may prove to be an albatross for most EUR-crosses in a world where many other major central banks are moving closer towards normalization.


The US economy is continuing to grow at a robust pace, at least in the manufacturing sector, which accounts for around 12% of all US jobs. Both readings of the sector due out from Markit IHS and the Institute of Supply Managers (ISM) suggest that June activity matched the torrid pace in May. The Markit Manufacturing PMI survey is due in at 62.6 from 62.1, while the ISM Manufacturing PMI is expected at 61 from 61.2. Cumulatively, running at a pace near 60 suggests that US economic data momentum is improving as vaccination efforts move forward, suggesting that the near-term outlook for corporate earnings remains strong.


The main issue for the US Dollar when it comes to the June US Nonfarm Payrolls report is whether or not the US labor market regained its momentum after a stumbling in back-to-back reports in April and May report. The April print came at +266K against an expectation for +1000K (or +1M) jobs added, while the May reading registered +559K versus 650K expected.

The fits and starts of the US economy fully reopening don’t seem to be dissuading forecasters from projecting a rebound in US labor market prospects, as falling jobless claims and rising vaccination rates bode well for US labor market potential. According to a Bloomberg News survey, forecasters are looking for jobs growth of +700K, while the unemployment rate (U3) is anticipated to drop from 5.8% to 5.6%. Meanwhile, the US labor force participation rate is due in at a meager 61.7%.

Even if there are good jobs data, there is still a long ways to go before the US reaches ‘full employment’ as experienced pre-pandemic. According to the Atlanta Fed Jobs Growth Calculator, the US economy needs +740K jobs growth per month over the next 12-months in order to return to the pre-pandemic US labor market of a 3.5% unemployment rate (U3) with a 63.4% labor force participation rate.

07/02 FRIDAY, 07/05 MONDAY | USD Financial Markets Closed for Federal Holiday

The US Independence Day of July 4 falls on a Sunday this year, meaning that federal observations will take place between Friday, July 2 and Monday, July 5. As a result, US financial markets will be operating on a unique schedule that will result in lower trading volumes; especially after the June US NFP report on Friday, there might be a sharp decline in market activity.

- On Friday, July 2, US bond markets close at 14 EDT/18 GMT. Meanwhile, US equity markets will have normal trading hours.

- On Monday, July 5, US bond markets and US equity markets will be closed all day.

In fact, after the US jobs report on Friday, traders may find that it’s not worth returning to their trading operations until Tuesday, July 6 given the lack of liquidity on Monday.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.