Trading News to Watch Next Week (05 – 09 November 2018)

The monetary policy streak from last week continues as we now expect two more from:

  • The Reserve Bank of Australia;
  • The Reserve Bank of New Zealand.

A FOMC statement is also included in next week’s markets agenda, as well as a few other notable events, all of which you can view in the detailed report below.

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Monday, 05 November 2018

 

GBP – Services PMI* – 10:30 am (High Impact)

Shows the level of a diffusion index based on surveyed purchasing managers in the services industry. The respondents are asked to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

The index is a leading indicator of economic health—businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy.

Above 50.0 indicates industry expansion, below indicates contraction. An actual diffusion index value of 53.9 is just shy of reaching a 54.0 forecast.

*PMI – Purchasing Managers’ Index

USD – ISM Non-Manufacturing PMI – 4:00 pm (High Impact)

Shows the level of a diffusion index based on a survey of about 400 purchasing managers, excluding the manufacturing industry. The respondents are asked to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

The index is a leading indicator of economic health—businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy.

Above 50.0 indicates industry expansion, below indicates contraction. An actual diffusion index value of 61.6 outperforms a 58.0 forecast.

*ISM – The Institute for Supply Management

Tuesday, 06 November 2018

 

AUD – Cash Rate – 4:30 am (High Impact)

Tracks the interest rate charged on overnight loans between financial intermediaries. Short-term interest rates are the paramount factor in currency valuation—traders look at most other indicators merely to predict how rates will change in the future.

An interest rate of 1.50% confirms a forecast of the same value.

AUD – RBA* Rate Statement – 4:30 am (High Impact)

It’s among the primary tools the RBA Reserve Bank Board uses to communicate with investors about monetary policy.

It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision.

Most importantly, it discusses the economic outlook and offers clues on the outcome of future decisions.

*RBA – Reserve Bank of Australia

USD – Congressional Elections – All Day (High Impact)

Voters will elect all 435 members to the US House of Representatives, and 34 members to the Senate.

The outcome will likely be projected before the official vote count is completed, based on early vote counts and exit polling.

NZD – Employment Change q/q – 10:45 pm (High Impact)

Monitors the change in the number of employed people. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.

An actual change of 0.5% slightly tops a 0.4% forecast.

NZD – Unemployment Rate – 10:45 pm (High Impact)

Shows the percentage of total workforce that is unemployed and actively seeking employment during the previous quarter.

Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.

An actual change of 4.5% underperforms, being just shy of reaching a 4.4% forecast.

Wednesday, 07 November 2018

 

NZD – Inflation Expectations q/q – 3:00 am (High Impact)

Shows the percentage that business managers expect the price of goods and services to change annually during the next 2 years.

The percentage is based off a survey of about 100 consumers which asks respondents where they expect prices to be 24 months in the future.

Expectations of future inflation can manifest into real inflation, primarily because workers tend to push for higher wages when they believe prices will rise.

An actual value of 2.0% for August outlines the same result produced in May.

NZD – Official Cash Rate – 9:00 pm (High Impact)

Shows the interest rate at which banks lend balances held at the RBNZ* to other banks overnight. Short–term interest rates are the paramount factor in currency valuation–traders look at most other indicators merely to predict how rates will change in the future.

An actual interest rate of 1.75% for confirms a forecast of the same value.

*RBNZ – Reserve Bank of New Zealand

NZD – RBNZ Monetary Policy Statement – 9:00 pm (High Impact)

Source: DF Markets

Two signs reading New Zealand (pointing left) and Australia (pointing right)

In this report the RBNZ is mandated to include details on how they will achieve their inflation targets, how they propose to formulate and implement monetary policy during the next five years, and how monetary policy has been implemented since the last statement’s release.

It provides valuable insight into the bank’s view of economic conditions and inflation—the key factors that will shape the future of monetary policy and influence their interest rate decisions.

NZD – RBNZ Rate Statement – 9:00 pm (High Impact)

The rate statement is among the primary tools the RBNZ uses to communicate with investors about monetary policy.

It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision.

Most importantly, it discusses the economic outlook and offers clues on the outcome of future decisions.

NZD – RBNZ Press Conference – 10:00 pm (High Impact)

The press conference is about 30 minutes long and has 2 parts. First a prepared statement is read, then the conference is open to press questions. The questions sometimes lead to unscripted answers that create heavy market volatility.

The press conference is among the primary tools the RBNZ uses to communicate with investors about monetary policy. It covers in detail the factors that affected the most recent interest rate decision, such as the overall economic outlook and inflation. Most importantly, it provides clues regarding future monetary policy.

Thursday, 08 November 2018

 

USD – FOMC* Statement – 8:00 pm (High Impact)

The FOMC usually changes the statement slightly at each release. It’s these changes that traders focus on.The statement is the primary tool the FOMC uses to communicate with investors about monetary policy.

It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.

*FOMC – Federal Open Market Committee

USD –  Federal Funds Rate – 8:00 pm (High Impact)

Shows the interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight.

Short-term interest rates are the paramount factor in currency valuation—traders look at most other indicators merely to predict how rates will change in the future.

FOMC members vote on where to set the target rate. The individual votes are then published in the FOMC statement.

An actual interest rate of <2.25% confirms a forecast of the same value.

Friday, 09 November 2018

 

AUD – RBA Monetary Policy Statement – 1:30 am (High Impact)

Gives provides valuable insight into the bank’s view of economic conditions and inflation—the key factors that will shape the future of monetary policy and influence their interest rate decisions.

GBP – GDP m/m – 10:30 am (High Impact)

Shows the change in the total value of all goods and services produced by the economy. The GDP is the broadest measure of economic activity and the primary gauge of the economy’s health.

An actual price change of 0.0% slightly underperforms vs. a 0.1% forecast.

GBP – Manufacturing Production m/m – 10:30 am (High Impact)

Tracks the change in the total inflation-adjusted value of output produced by manufacturers. Manufacturing makes up around 80% of total industrial production and tends to dominate the market impact.

The index is a leading indicator of economic health—production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and earnings.

An actual value change of -0.2% underperforms vs. a 0.1% forecast.

GBP – Prelim GDP q/q – 10:30 am (High Impact)

Shows the change in the inflation-adjusted value of all goods and services produced by the economy. The GDP is the broadest measure of economic activity and the primary gauge of the economy’s health.

An actual value change of 0.4% confirms a 0.4% forecast.

USD – PPI* m/m – 2:30 pm (High Impact)

Shows the change in the price of finished goods and services sold by producers. It’s a leading indicator of consumer inflation—when producers charge more for goods and services the higher costs are usually passed on to the consumer.

An actual value change of 0.2% confirms a 0.2% forecast.

*PPI – Producer Price Index

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Missed our previous report? Then make sure to catch up on last week’s top news! While you’re at it, don’t forget to also visit our Economic Calendar for extra details regarding each event.

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