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90% chance for Canada Interest rate hike on Wednesday, July 12th

90% chance for Canada Interest rate hike on Wednesday, July 12th

Job market reports of Canada and the USA have become the leading topics of the week. If in the former case statistics caused the markets to bargain on the Bank of Canada interest rate increase up to 0.75%, then in the latter case investors entertained doubts about next FRS interest increase rate (that is strange considering futures chart provided by CME Group).

Sent signals for the last week:

UK MARKIT MANUFACTURING PMI [Sell1], the pair GBPUSD passed down 15 points after the signal.

US ISM MANUFACTURING PMI [Buy2], the USDJPY pair up 16 points.

US NONFARM PAYROLLS [Buy1], the USDJPY pair up 20 points at first minute.

US ADP NONFARM EMPLOYMENT CHANGE [Sell1], the USDJPY pair fell 10 points.

US EIA NATURAL GAS STORAGE CHANGE [Sell1], the #NG pair fell 20 points.

USD

In expectation of Friday dollar sensitivity to externalities was observed. One of such externalities was the protocol of FOMC session publication (on Wednesday) which took place a few weeks ago. Some disagreements within the Committee members indirectly observed in protocols may cause market alertness regarding this year further FRS interest increase.

In the way of another sticking point for the buck, there were advanced job placement results published by the ADP on Thursday. Forecasts expected to be higher (158K in fact against 185K projected), that amid Tramp’s twit on Monday (a word “weak” was used in relation to job market) put markets on the alert about expected optimistic publications of the NFP.

Investors have no convincing evidence of Janet Yellen will increase an interest rate soon and are doubtful of further FRS policy tightening, which is confirmed by one more “mixed” job market report published on Friday:   

US Average Hourly Earnings [m/m]      0.2% (-0.1%)      0.3 %

US Unemployment Rate             4.4% (0.1%)        4.3 %

US Nonfarm Payrolls    222 (43)               179

US Average Hourly Earnings [y/y]           2.5% (-0.1%)      2.6 %

At the same time there is a tendency towards the probability of target rates in December:

 

GBP

Manufacturing PMI index value appeared lower than it was expected and caused pound quotation fall earlier in the week.

On Tuesday a downfallen Construction PMI was animated, and on Wednesday Services PMI reduced, in the same manner, was animated too.

Brexit still saps the economy of the UK, a great part of industrial production data came in so-called “red zone” on Friday and correspondingly lower than it was expected.  Thereby amid probable interest rate increase was expected from the BOE (Bank of England), the US dollar powered past pound at the end of the week. Don’t forget to keep watch over CPI index.

AUD&NZD

Australian currency quotation falling began one day before the RBA (Reserve Bank of Australia) sessions on interest rates – on Tuesday session protocols of the Australian Central Bank proved propensity to priming of the economy and soft monetary policy resulting in traders disappointment. 

RBA fallout resulted in “NZD” quotations decline. This relapse caused a short-term break in business confidence. 

At a time when export turnover grew, China held NZD rate, and traders took up decline all week long.

СAD

Financial markets of Canada opened trade on Tuesday having celebrated National Founding Day, that is why NZD had to “win back” oil hike one day in arrears (from Monday till Tuesday) resulted in CAD strength on session during the business week.

Quotations have received an additional macroeconomic fillip in the form of a ramped up employment which outstripped forecasts and thus gave a great appétit to CAD amid expected increase of Canada interest rate.  

It seems, markets finally have believed in next week rate hike of the Bank and probability of such event on their opinion is equal 90%. Even now we can see the forecast of the rate increase up to 0.75% (from current 0.55%) over the next Wednesday, July 12.

EXPECTATIONS FOR COMING WEEK

Perhaps, the main events of the coming week will be the BOC decision (the market 90% sure in rate increase), and also Job market of the United Kingdom (the BOE is going to tighten the monetary politics “in the coming months”).

Both reports will be published on Wednesday. The British report may become the hardest one as it may contain a controversial, complex stream. Please pay your attention to additional comments on the site for each indicator before trading. 

Also pay attention to Yellen speechification on Thursday as far as the market is at a stand regarding monetary future of the FOMS and will keep an eye on the FRS more than ever.

Integrated inflation data and retail report of the USA will be published on Friday. It may be hardly suitable for use in trade and require a new test as data are published all at the same time. 

Sent signals for the last week:

UK MARKIT MANUFACTURING PMI [Sell1], the pair GBPUSD passed down 15 points after the signal.

US ISM MANUFACTURING PMI [Buy2], the USDJPY pair up 16 points.

US NONFARM PAYROLLS [Buy1], the USDJPY pair up 20 points at first minute.

US ADP NONFARM EMPLOYMENT CHANGE [Sell1], the USDJPY pair fell 10 points.

US EIA NATURAL GAS STORAGE CHANGE [Sell1], the #NG pair fell 20 points.

A full calendar of upcoming trading events that you can use for algorithmic trading can be found on the trading signals page.

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