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Interest rates, Non-farm payroll - Week ahead

Interest rates, Non-farm payroll - Week ahead

Coronavirus cases have passed 18 million across the globe, with deaths predicted to surpass 700k by the end of this week ahead. Markets are slowly pricing in how the Coronavirus is affecting countries' respective markets. The US Dollar is down 10% from its March highs, and the ASX is slowly edging down, booking losses three weeks in a row. This is your week ahead.

U.S Dollar Index

Tuesday, 4th August – Australian Retail Sales MoM and RBA Interest Rate Decision

The overarching story with regards to the Australian economy is the current situation in Victoria. They have seen triple-digit gains in Coronavirus cases, with cases jumping to 671 new infections today from 397 just a day before. The Premiere for the state of Victoria, Daniel Andrews, declared a state of disaster as they officially admit that they have lost full control over the virus. However, Daniel has not pushed for total lockdown yet, continuing with strict curfews and restrictions on how far and how many individuals can leave the house. This double-digit jump in infected cases comes when the states' largest city, Melbourne, has been in a stay at home order for the past three weeks. This puts immense pressure on the Premiere to impose mandatory lockdown, like what took place in New Zealand. Education Minister Dan Tehan stated that the federal government would "absolutely" support Victoria in ramping up its measures. The events occurring in Victoria may sway the Reserve Bank of Australia to cut rates even lower this week ahead. The rate currently sits at 0.25%, after a steep cut of 50 basis points from 0.75% at the peak of the Pandemic.

With retail sales jumping for the month of June by 2.4%, it is still seen whether Australia Citizens have been purchasing fewer goods as the Coronavirus ramps up. However, analysts predict a similar growth of 2.4% for the month of July.

Tuesday 4th August – New Zealand Employment / Unemployment Figures

With New Zealand returning to a relatively normal, the effects of the lockdown slowly emerge, especially on the labor market. The unemployment rate was 4.2% in the first quarter. However, many analysts believe that this number was propped up because the government heavily subsidized wages and introduced substantial assistance. Bank of New Zealand Analysts predicts a jump in the unemployment rate this week ahead to 5.9%, with ANZ economists forecasting 5.7%. However, ANZ states that these figures may understate the real weakness in the labor market, saying that "looking ahead, official data will, unfortunately, give a poor steer on the true state of the labor market for a while, due to volatility and temporary policy supports that are delaying job losses."

Wednesday, 5th August – Euro Retail Sales YoY

With the European Union passing a 750 Billion Euro fund to boost their economy, traders and investors are looking out for the continents' retail sales number to identify whether citizens are spending. Analysts at ING predict "a sharp rise.. to be expected before things start to level off." Retail sales are an excellent bearing as to how fast the economy is recovering. However, analysts predict a sharp drop by 5.1% in retail sales Year over Year, with last year's results being a drop in 0.2%.

Thursday, 6th August – Bank of England Policy report, Monetary policy summary, Interest rate Decision, BoE Governor Bailey speech

With Prime Minister Boris Johnson delaying the nationwide lockdown's de-escalation for two weeks due to Coronavirus continuing to ravage the country, he has finally hinted that de-escalation may come in the following weeks. Currently, the United Kingdom has had over 305k confirmed Coronavirus cases, with 46,200 Coronavirus deaths. There is a chance that the Bank of England brings rates below zero; however, they have been reluctant in the past due to concerns over bank profits. Chief economist at Investec, Philip Shaw, stated that interest rate markets were pricing in a 60% chance of a 25 basis point cut to -.15% by June next year. This is an event that will induce volatility within the major GBP pairs, so traders should be aware of the timing of their trades this week ahead if they wish to trade the pound.

Friday, 7th August – Non-Farm Payrolls

Deborah Brix, the physician overseeing the White House Coronavirus response, told CNN that the United States had entered a "new phase" of the Coronavirus pandemic as outbreaks start to increase in rural and urban areas. She states the Pandemic has become "Extraordinarily Widespread." This conveys that the USA is not close to steering clear of the damages the Coronavirus face. Analysts predict a net increase in jobs of 4.8 million for the month of June.

Many important events this week ahead – traders should look out for volatility in the major pairs in the market.

Trade safe!

Anish Lal, an analyst here at Blackbull Markets have some excellent pointers on the GBP/USD pair for the week ahead. You can watch it here.