Forex Investment and Currency Trading

Asia: Chinese July data in focus, Q2 GDP from HK and Indonesia
Following the positive performance in Q2, the market will continue to expect improvements from Chinese economic data for July. Although the y/y contraction in exports and imports (Tuesday 11) is likely to persist, industrial production (Wednesday 12) should remain supported by restocking as well as domestic demand, mirroring the consistent improvement in PMI indices. While Beijing seems to be concerned about the threat of inflation, the producer and consumer price indices (Monday 10) are expected to show muted inflationary pressure, at least for now. Elsewhere, Indonesia (Monday 10) and Hong Kong (Friday 14) will report their Q2 GDP. Hong Kong, in line with the rest of the region, is expected to report a narrowing contraction from Q1-2009. Meanwhile, Indonesia Q2 growth should accelerate on a q/q basis, reflecting the strong performance of the largest economy in ASEAN. The Bank of Korea is expected to hold rates unchanged at its MPC meeting (Tuesday 11); watch out for any comments regarding the possibility of reversing loose monetary policy.

Africa: SARB to cut by 50bps
Following a July break, the SARB MPC meets once again to decide on rates on 13 August. Market expects an additional rate cut of 50bps to 7%, following which interest rates are likely to remain on hold. A number of factors support this view. PPI is likely to move further into negative territory, and even consumer inflation has fi nally shown signs of moderating more rapidly. While electricity tariff increases and above-inflation wage settlements pose risks to the outlook, the rapid deceleration in money supply growth and private sector credit extension are likely to be more immediate concerns. Bank lending standards have been tightened and the pricing on loans is less favourable. While the growth outlook has become more positive in the rest of the emerging world, South Africa’s July PMI fell further – a sign that downside risks to growth persist. Under the circumstances, further easing would be justified.

US: FOMC statement will be watched for any optimism on the economy
Non-farm payrolls (Friday 7) are expected at -328k vs. -467k prior, with unemployment ticking up to 9.6%. Average hourly earnings are likely to fall again, but any upward move in weekly hours would be seen as an important ‘green shoot’. At the FOMC meeting (Wednesday 12) the focus will be on how much the statement changes to reflect brighter economic data. The Fed may comment on inventories, perhaps also on house prices, but continue to show concern about final demand. Retail sales (Thursday 13) will provide further insight into the consumer.

Europe: Eurozone in recession, but improving
Eurozone Q2 GDP (Thursday 13) is expected to show a much less severe economic contraction, following the collapse in activity in Q1-2009. An accelerating decline in CPI should be confirmed on Thursday 13, with underlying inflation slowing further. In the UK, the focus will be August’s Inflation Report, which will deliver the latest growth and inflation forecasts from the Bank of England, and will shed further light on the latest policy decision. UK unemployment is set to worsen, with a likely relatively moderate increase in the claimant count measure probably concealing the true situation.

Japan: BOJ to confirm that the worst is over
The Bank of Japan is expected to keep policy unchanged at its meeting on Tuesday 11. Economic data is likely to indicate a gradual improvement in the outlook: machine orders should rebound after three months of contraction and the current account (Sunday 9) is expected to reflect June’s pickup in exports. Recent improvements in confi dence are likely to be echoed in eco-watchers survey (Monday 10).

Australia/ New Zealand: RBA testimony will be closely watched
Australia’s wage data (Wednesday 12) and New Zealand’s retail sales (Thursday 13) will be the respective highlights, while survey indicators will shed light on the latest sentiment. Finally, look out for the RBA governor’s semi-annual parliament testimony towards the end of the week for his latest assessment of the economy and the central bank’s policy stance.