FOREX ECONOMIC CALENDAR TALKING POINTS:

The US-China trade war and its impact on the world’s two largest economies will be in focus all week but particularly on Wednesday .

The July Fed meeting is likely to produce extremely volatile market reactions whereas the August BOE meeting will be less exciting.

Retail trader positioning is suggesting the US Dollar rally may still have some legs.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

07/31 WEDNESDAY | 01:00 GMT | CNY CHINA MANUFACTURING PMI (JUL)

Forex risk appetite will likely turn to US-China trade war developments early next week with top US officials scheduled to travel to China in hopes of reviving trade talks between the two countries. US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer are set to discuss trade policy with China’s Vice Premier Liu He on Tuesday and will be the first face-to-face meeting between trade negotiators since President Trump and President Xi met at the G20 Summit nearly a month ago.

Aside from US-China trade war discussions between Mnuchin, Lighthizer and He next week, China Manufacturing PMI and Services PMI data could shed light on the Chinese economy. China’s manufacturing sector has been running in contraction territory with a reading under 50.0 for the last 6 out of 7 months as tariffs and slowing global GDP growth cripple the industry. The July 2019 China manufacturing PMI is expected to cross the wires on Wednesday at 1:00 GMT with a reading of 49.6 according to Bloomberg and up from the 49.3 reading in June.

Read the full report: US-China Trade War Talks, July China Manufacturing PMI & USD/CNH Rate Forecast

07/31 THURSDAY | 09:00 GMT | EUR Eurozone GDP (2Q A) & Eurozone CPI (JUL A)

Next week’s economic calendar is jam-packed with event risk and Wednesday’s release of Eurozone GDP and CPI data at 9:00 GMT is certainly among the top 5 forex trading events. The closely watched economic indicators will follow last week’s July ECB meeting where central bank President Mario Draghi paved the road to ease monetary policy in the near future.

Although Draghi mentioned that a rate cut was not discussed among the ECB Governing Council’s most recent meeting, he did state that “a significant degree of monetary stimulus continues to be necessary for financial conditions to remain very favorable and support the euro area expansion, the ongoing build-up of domestic price pressures and headline inflation developments over the medium term.”

Read the full report: Q2 Eurozone GDP, July Eurozone Inflation & EUR/JPY Rate Forecast

07/31 WEDNESDAY | 18:00 GMT | USD Federal Reserve Rate Decision & Press Conference

Persistent uncertainty surrounding the US-China trade war, mixed US economic data and ambiguous Fed-speak have all provoked significant volatility in Fed rate cut bets and consequently the US Dollar. Forex traders could be provided clarity on Wednesday, however, with the Federal Reserve slated to publish its latest monetary policy statement at 18:00 GMT.

While rate traders have priced the probability of a rate cut as a near-certainty according to overnight swaps, speculation over the size of the anticipated rate cut will likely linger into the FOMC’s interest rate decision.

The sharp improvement in US economic data over recent weeks has seen little impact on lofty rate cutbets – driven largely by slowing global GDP growth and ongoing trade policy uncertainty – which could position the US Dollar for major upside if the Fed refuses to capitulate.

Read the full report: July Fed Meeting & USD/JPY Rate Forecast

08/01 THURSDAY | 11:00 GMT | GBP Bank of England Rate Decision & Quarterly Inflation Report

With PM Boris Johnson officially at the helm of British Parliament, the drums for no-deal Brexit are beating louder across the UK. This has put spot GBPUSD under a considerable amount of pressure with potential for further weakness which could be sparked by the August BOE meeting slated for next Thursday at 11:00 GMT.

The Bank of England has been shackled to a cautious monetary policy normalization approach considering the vast amount of risk and uncertainty surround Brexit. Although, the hawkish tilt by the UK’s central bank has shifted to a more neutral bias recently and monetary policy outlook could turn even less optimistic at the upcoming August BOE meeting. Aside from forward rate guidance, the BOE will also provide markets with its quarterly inflation report.

Read the full report: August BOE Meeting & GBP/USD Rate Forecast

08/02 FRIDAY | 12:30 GMT | USD Change in Nonfarm Payrolls & Unemployment Rate (JUL)

Despite the serious risk faced by spot EURUSD early next week surrounding Q2 Eurozone GDP and the July Fed meeting on deck for Wednesday, the July US jobs report slated for Friday at 12:30 GMT should not be overlooked. Markets should expect the headline change in nonfarm payrolls figure for July to come in at 169K additions according to Bloomberg’s economist survey. This compares to 224K additions in June and 72K added jobs in May.

Judging by the Atlanta Fed Jobs Calculator, the US economy needs to add 108.5K jobs per month over the next year in order to maintain the unemployment rate (U3) at 3.7% over that time horizon. Another red-hot US jobs report could put the Federal Reserve’s anticipated dovish monetary policy shift into question and solidify the expected July FOMC rate cut as a one-and-done ‘insurance cut.’ If true, a sharp repricing of lofty Fed rate cut bets could be expected to push spot EURUSD on the path toward printing fresh year-to-date lows.

Read the full report: July US Jobs Report & EUR/USD Rate Forecast

FX TRADING RESOURCES

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

To contact Christopher, email him at cvecchio@dailyfx.com

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