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Forex Weekly Outlook August 18-22

US housing data, Inflation data in the UK, the US and Canada, FOMC Meeting Minutes, Philly Fed Manufacturing Index, Janet Yellen’s speech are a few of the major events on Forex calendar. Follow along as we explore the Forex market movers for this week.

Last week US retail sales disappointed with a flat reading in July, a poor start to the third quarter, suggesting some loss of momentum. Economists expected 0.2% increase. The unchanged reading was the weakest since January, preceded by a 0.2% gain in June. However, despite the lukewarm release, sales are expected to rise in the coming months thanks to the growth trend in the labor market, strengthening domestic demand. The uneven economic growth will enable Fed Chair Janet Yellen to keep interest rates low for a longer period.

1. UK Inflation data: Tuesday, 8:30. UK consumer prices edged up 1.9% in June, reaching a five year high amid price rises in food and summer clothes. The reading was higher than the 1.6% climb forecasted by analysts and topped May’s 1.5% increase. This rise may prompt the BOE to increase rates sooner than estimated. Inflation is expected to remain tame in the coming months, however, inflation threat will rise if wages increase. UK consumer prices are expected to reach 1.8% this time.
2. US Building Permits: Tuesday, 12:20. U.S. housing starts and building permits unexpectedly fell in June, indicating uneven growth in the housing market, following the slowdown in late 2013. Permits declined 4.2% to a 963,000-unit pace in June, while economists expected them to rise to a 1.04-million unit pace. Permits for single-family homes edged up 2.6% to a 631,000 unit-pace, the highest level since November. Permits for multi-family housing plunged 14.9% to a 332,000-unit pace. A rise to on million unit pace is forecasted now.
3. US Inflation data: Tuesday, 12:30. U.S. consumer prices gained 0.3% in June, following 0.4% increase in May, amid a rise in gasoline prices. The rise was in line with market forecast. On a yearly base CPI edged up 2.1% as in May, indicating inflationary pressures are building up. Fed Chair Janet warned the Fed may raise interest rates sooner than estimated if the job market continued to improve. Meanwhile, core inflation excluding energy prices rose 0.1% after rising 0.3% in May. In the 12 months through June, the core CPI increased 1.9 % after climbing 2.0% in May. Consumer prices are expected to rise 0.1% , while core prices are expected to gain 0.2%.
4. US FOMC Meeting Minutes: Wednesday, 18:00. The FOMC minutes from June meeting showed that taper continued as scheduled, expecting to end in October, if all goes well. The Fed is forecasted to stop reinvestment of paid principal on bonds as soon as the first rate hike is announced. For controlling the pace of unwinding, interest on excess reserves (IOER) will be the key tool and reverse repos will play a supporting role. The Fed noted a rise in inflation, however the lob market recovery is not complete despite recent improvements.
5. US Unemployment Claims: Thursday, 12:30. The number of Americans applying for U.S. unemployment benefits increased last week to 311,000 from 290,000 in the previous week. Despite the 21,000 climb, jobless claims remain close to pre-recession levels. The four-week average, a less volatile measure, increased 2,000 to 295,750, nearing the averages before the Great Recession in late 2007. The number of jobless claims is expected to grow by 299,000.
6. US Existing Home Sales: Thursday, 14:00. The U.S. existing home sales edged up in June to a seasonally adjusted annualized rate of 5.04 million units, rising 2.6% from May, however still below the 5.16 million-unit rate seen last year. Economists expected a lower figure of 4.98 million units. Inventories remained high and price gains slowed in many parts of the country increasing transactions. Nevertheless, the housing sector remains a concern for the Federal Reserve ever since the rise in mortgage rates in 2013. Existing home sales are expected to reach 5.01 million units.
7. US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing activity in the Philadelphia-region picked up in July to 23.9 points, rising 6.1 points from June. This was the fastest gain in more than three years. Analysts expected the index to drop to15.6 in July. The current new orders component increased 17 points. The current indicators for labor market conditions to improve. Philly Fed Manufacturing Index is expected to reach 20.3.
8. Janet Yellen speaks: Friday, 14:00. Federal Reserve Chair Janet Yellen will speak to the central bank’s symposium in Jackson Hole, Wyoming. Yellen will deliver a speech titled “Labor Markets.” She will not answer questions from the audience. The Fed’s three-day gathering of central bankers and economists will be titled “Re-evaluating Labor Market Dynamics.” The conference has foreshadowed some of the Fed’s major policy shifts. Market volatility is expected.
9. Mario Draghi speaks: Friday, 18:30. European Central Bank head Mario Draghi will follow Federal Reserve Chair Janet Yellen’s speech at the Jackson Hole Symposium and talk about employment issues. Market volatility is expected.