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US Dollar Looks to Services ISM to Guide Fed Rate Hike Speculation

US Dollar Looks to Services ISM to Guide Fed Rate Hike Speculation

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro may be more response to Retail PMIs vs. 2Q GDP revision
  • US Dollar looks to services ISM to shape Fed rate hike outlook
  • Aussie Dollar little-changed after status-quo RBA rate decision

The final revision of second-quarter Eurozone GDP figures as well as Augusts’ Retail PMI roundup for the single currency area headline the economic calendar in European trading hours. The former reading may pass with little fanfare because the data mostly covers the period preceding the UK “Brexit” referendum. The latter set of figures may help show if uncertainty following the vote is cooling activity on the Continent.

News-flow out of the region has rapidly deteriorated relative to consensus forecasts over the past three weeks, opening the door for a downside surprise. That may weigh on the Euro as traders speculate that the ECB will have to make good on the pledge to boost stimulus in the near term as conditions deteriorate. An upbeat result will probably fall on deaf ears however considering the central bank’s overtly dovish posture.

Later in the day, the spotlight will turn to Augusts’ ISM Non-Manufacturing Composite survey. Expectations suggest service-sector activity growth slowed for a second consecutive month. A soft result in line with a string of disappointing outcomes over the past two months may pour cold water on Fed rate hike speculation, sending the US Dollar lower. Needless to say, an upside surprise may boost the greenback.

The Yen traded lower as risk appetite firmed in overnight trade, undermining support for the anti-risk currency. Indeed, prices intraday price swings mirrored Japan’s benchmark Nikkei 225 stock index. The Australian Dollar rose alongside front-end bond yields ahead of the RBA rate decision, seemingly reflecting bets on a status-quo result. Prices were little-changed when the central bank delivered as expected.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:00

NZD

ANZ Truckometer Heavy (MoM) (AUG)

6.7%

-

-5.3%

23:01

GBP

BRC Sales Like-For-Like (YoY) (AUG)

-0.9%

1.4%

1.1%

23:30

AUD

ANZ Roy Morgan Weekly Consumer Conf

114.3

-

118.4

0:00

NZD

QV House Prices (YoY) (AUG)

14.6%

-

14.1%

1:30

AUD

Net Exports of GDP (2Q)

-0.2

0

1.1

1:30

AUD

BoP Current Account Balance (2Q)

-15.5b

-20.0b

-14.9b

4:30

AUD

RBA Cash Rate Target

1.50%

1.50%

1.50%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

GDP (QoQ) (2Q)

0.6% (A)

0.3%

Medium

5:45

CHF

GDP (YoY) (2Q)

2.0% (A)

1.1%

Medium

6:00

EUR

Germany Factory Orders (MoM) (JUL)

0.2% (A)

-0.3%

Medium

6:00

EUR

Germany Factory Orders (YoY) (JUL)

-0.7% (A)

-3.0%

Medium

7:15

CHF

CPI (MoM) (AUG)

-0.1%

-0.4%

Medium

7:15

CHF

CPI (YoY) (AUG)

-0.1%

-0.2%

Medium

7:15

CHF

CPI - EU Harmonized (MoM) (AUG)

-0.1%

-0.1%

Low

7:15

CHF

CPI - EU Harmonized (YoY) (AUG)

0.0%

-0.5%

Low

7:30

EUR

Markit Germany Construction PMI (AUG)

-

51.6

Medium

8:10

EUR

Markit Germany Retail PMI (AUG)

-

52.0

Medium

8:10

EUR

Markit Eurozone Retail PMI (AUG)

-

48.9

Medium

8:10

EUR

Markit France Retail PMI (AUG)

-

51.6

Low

8:10

EUR

Markit Italy Retail PMI (AUG)

-

40.3

Low

9:00

EUR

Eurozone GDP SA (QoQ) (2Q F)

0.3%

0.3%

Medium

9:00

EUR

Eurozone GDP SA (YoY) (2Q F)

1.6%

1.6%

Medium

9:00

EUR

Eurozone Gross Fix Cap (QoQ) (2Q)

-0.1%

0.8%

Low

9:00

EUR

Eurozone Govt Expend (QoQ) (2Q)

0.2%

0.4%

Low

9:00

EUR

Eurozone Household Cons (QoQ) (2Q)

0.3%

0.6%

Low

9:40

GBP

BOE ILTR Operation Results

-

-

Low

13:50

GBP

BOE Bond-Buying Operation Results

-

-

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0984

1.1085

1.1121

1.1186

1.1222

1.1287

1.1388

GBP/USD

1.3102

1.3201

1.3247

1.3300

1.3346

1.3399

1.3498

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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