Week Ahead in FX (Aug. 1-5): RBA, BOE, and Jobs Data in Focus

Welcome to a brand new trading month, fellas!

August is off to an exciting start with a couple of rate decisions and three jobs releases.

But before that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!

And now for the closely-watched potential market movers this week:

Major Economic Events:

RBA rate statement (Aug. 2, 4:30 am GMT) – Another interest rate hike might be comin’ in hot from the Land Down Under, as the RBA will be announcing its policy decision early in the week.

RBA officials will likely bring borrowing costs up from 1.35% to 1.85% in an effort to combat rising inflation, possibly marking its third 0.50% hike in a row. Note that this was already scaled down from expectations of a 0.75% hike since economic activity seems to be slowing recently.

New Zealand quarterly jobs report (Aug. 2, 10:45 pm GMT) – First among the jobs releases this week is New Zealand’s Q2 employment report, which is slated to show a faster pace of hiring for the period.

Analysts are counting on a 0.5% increase in employment, outpacing the earlier 0.1% uptick and confirming that the economy is going strong. This should be enough to bring the unemployment rate down from 3.2% to 3.1% and possibly convince market watchers that another RBNZ hike is possible.

BOE monetary policy statement (Aug. 4, 11:00 am GMT) – The Bank of England will also be making its policy statement this week, and a larger interest rate hike of 0.50% is eyed. Will they deliver?

Inflation has been running pretty high in the U.K. so policymakers need to step up their game from their earlier 0.25% hikes.

Keep in mind that Governor Bailey has reiterated that their tightening moves won’t be their last and that they are ready to act more “forcefully” to rein inflation in.

Canadian jobs report (Aug. 5, 12:30 pm GMT) – Next up on the jobs front is Canada, which is due to report a rebound of 18.2K in hiring from the earlier 43.2K drop in employment.

However, this might not be enough to keep the jobless rate from rising from 4.9% to 5.0%, especially if the actual employment figure comes in below expectations.

U.S. non-farm payrolls report (Aug. 5, 12:30 pm GMT) – Last but certainly not least is Uncle Sam’s NFP report!

Another slower pace of hiring is eyed compared to the previous months, as number-crunchers are estimating a 250K increase in employment versus the earlier 372K gain. This could keep the jobless rate steady at 3.6% for July.

As always, underlying figures and revisions to previous releases might also determine how the dollar would react. Average hourly earnings are expected to show another 0.3% rise in wages while the labor force participation rate could also hold steady.

Don’t forget to keep tabs on leading jobs indicators such as the ISM surveys, JOLTS jobs openings, and Challenger job cuts data due throughout the week!

Forex Setup of the Week: GBP/JPY

With the BOE statement coming up this week, we might just see a big move from this pound pair!

Guppy is consolidating inside a symmetrical triangle pattern visible on the 4-hour time frame, and price is currently sitting on support.

A hawkish announcement might trigger a big bounce back up to the triangle top around the 165.00 handle while another cautious one could spur a breakdown.

If the latter happens, GBP/JPY could tumble by the same height as the chart pattern or roughly 800 pips.

Technical indicators are giving mixed signals, though, as the moving averages are oscillating while Stochastic is reflecting exhaustion among sellers.

In any case, make sure you practice proper risk management if you’re trading the news!