Forecasting the Week Ahead: Focus on the Fed’s Decision.

This past week saw the US Dollar facing slight losses amid a notable rebound in the Japanese Yen and a decline in US yields across the board. As we look ahead, the focus will shift to key events including the Bank of Japan (BoJ) and Federal Open Market Committee (FOMC) meetings, followed by the Nonfarm Payrolls report.

The US Dollar Index (DXY) has been trading within a consolidative range near the critical 200-day moving average, fluctuating between 104.30 and 104.40. Key economic releases on the horizon include the Dallas Fed Manufacturing Index on July 29, followed by the Conference Board’s Consumer Confidence Index and JOLTs Job Openings on July 30.

In addition, we’ll see the release of weekly Mortgage Applications data from the MBA, the Chicago PMI, Pending Home Sales, ADP Employment Change, and the Employment Cost Index. The FOMC meeting will be a major focal point, with significant attention on any potential policy shifts.

August 1 will bring weekly Initial Jobless Claims, the final S&P Global Manufacturing PMI, Construction Spending, and the ISM Manufacturing PMI. The week will conclude with the Nonfarm Payrolls report, the Unemployment Rate, and Factory Orders on August 2.

With these crucial events ahead, market participants will be closely monitoring economic indicators and central bank meetings for signals on future economic and monetary policy directions.

The EUR/USD pair’s rebound in the latter part of the week was insufficient to drive a positive weekly close, ending around 1.0870. The upcoming week will see Retail Sales data from Germany on July 29, followed by the advanced Q2 GDP Growth Rate for Germany and the euro area on July 30. Additionally, Germany’s preliminary Inflation Rate will be released. On July 31, Germany’s Unemployment Change and Unemployment Rate are expected, along with the preliminary Inflation Rate for the broader Eurozone. August 1 will feature the final HCOB Manufacturing PMI for both Germany and the euro area, along with the Eurozone’s Unemployment Rate.

GBP/USD experienced its second consecutive week of losses, falling below the 1.2900 level amid renewed expectations of an interest rate cut by the Bank of England (BoE) next week. The week will begin with Mortgage Approvals and Mortgage Lending data on July 29. On August 1, the BoE will announce its interest rate decision, with Nationwide Housing Prices and the final S&P Global Manufacturing PMI also on the agenda.

USD/JPY marked its fourth consecutive week in negative territory, influenced by recent FX interventions and speculation of a potential BoJ rate hike. Japan’s Unemployment Rate will be released on July 30, followed by preliminary Industrial Production and Retail Sales on July 31. The same day will see Consumer Confidence, Housing Starts, and the BoJ’s policy meeting. On August 1, Weekly Foreign Bond Investment figures will be published, along with the final Jibun Bank Manufacturing PMI.

AUD/USD faced a challenging week, dropping to two-month lows near the 0.6500 support level but showed some recovery on Friday after nine days of losses. The week will begin with Flash Building Permits in Australia on July 30, followed by the Inflation Rate, the RBA’s Monthly CPI Indicator, Retail Sales, and Housing Credit on July 31. On August 1, the final Judo Bank Manufacturing PMI and Balance of Trade results will be released, with Home Loans and Investment Lending for Homes closing the week on August 2.

Anticipating Key Economic Speeches:

• BoE Governor Andrew Bailey will speak on August 1, followed by MPC member Jon Cunliffe.
• Jon Cunliffe will also speak on August 2.

Central Bank Meetings to Watch:

• The BoJ will convene on July 31.
• The Fed is expected to maintain current interest rates at its meeting on July 31.