Chinese and European Manufacturing to Show Contrasting Data
The EUR/USD has gained 1.02 percent in a weekly basis after the approval by the Greek parliament of austerity measures needed to unlock bailout funds from creditors. Central banks had a secondary role this week as there were minutes published from the Reserve Bank of Australia and the Bank of England. The main exception was the Reserve Bank of New Zealand (RBNZ) that cut rates by an expected 25 basis points to give the economy a competitive advantage as it copes with lower prices for their exports. This week in FX will end with the release of preliminary manufacturing surveys from China and Europe.
The flash manufacturing purchasing managers index (PMI) from China is forecasted to come in at 49.8. The reading by independent firm Markit is just a sliver below what is considered expansion at 50. The official statistic by the Chinese statistics office was a hair better at 50.2. Chinese manufacturing is weaker and could trigger further stimulus action by the People’s Bank of of China. In June factory orders showed optimistic growth, but it was balanced by more job losses in the sector. The World Bank, the Asian Development Bank, amongst other organizations, have downgraded Chinese growth for 2015 in a range from 6.9 to 7.2 percent and slowing further in 2016.
With the dust beginning to settle in Europe after the hectic negotiations between Greece and its creditors the manufacturing PMI survey will release preliminary data to gauge the state of European factories. French manufacturing has impressed of late after posting a 50.5 reading and getting back into expansionary territory. German factories have struggled with lower demand and a stronger EUR, but are still forecasted to post a 52.1 reading after posing a 51.9 last month. Output remains strong in Germany, but it is the new business demand and employment components that signal a potential slowdown.
Next week the market will be laser focused on the Federal Open Market Committee (FOMC) on Wednesday, July 29. The probabilities of an interest rate hike by the Federal Reserve have been pushed back towards the end of the year, but the Federal Reserve can give more clarity on the timing of the monetary policy decision when its FOMC voting members meet in Washington.
Manufacturing Indicator events to watch this week:
Thursday, July 23
9:45pm CNY Markit Flash Manufacturing PMI
Friday, July 24
3:00am EUR French Flash Manufacturing PMI
3:30am EUR German Flash Manufacturing PMI
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar