The Friday Forex Takeaway – Episode 47

<h2>Key Points from This Week</h2>
<p><strong>RBNZ Extends QE Program</strong></p>
<p>At the bank’s August meeting this week, the RBNZ increased its QE program from NZD 60 billion to NZD 100 billion as well as extending the duration of the program to June 2022. The RBNZ also said that it was discussing the potential for further measures, such as negative rates, amidst parts of the country returning to lockdown in response to a fresh outbreak of the virus there. The nation’s largest city, Auckland, has gone back into lockdown following the first set of confirmed cases there for over 100 days this week.</p>
<p><strong>UK Labour Market Crashes</strong></p>
<p>The latest UK employment data confirmed the biggest loss in jobs, in the three months through June, since 2009. The data reflects the severity of the damage caused by the COVID-19 pandemic but also raises serious concerns over the outlook for the UK economy. With the government furlough scheme due to expire in October there are grave concerns of an employment cliff edge with many employers unlikely to be able to keep staff on without government support meaning that the employment situation is likely to get far worse this winter.</p>
<p><strong>US CPI Rises Firmly</strong></p>
<p>US consumer prices were seen rising firmly in July with the core reading rising at its fastest pace in thirty years as the US economic recovery continues to gather pace. With headline inflation remaining unchanged at 0.6% on the month, however, there are some concerns that the gains could prove short lived, especially given that more than ten US states have re-entered lockdown following a fresh upward trend in infection number and the death toll there.</p>
<h2>Key Events Next Week</h2>
<p><strong>UK CPI</strong></p>
<p>The latest UK inflation data next week will be closely watched by traders. Consumer prices rebounded firmly over the prior month and traders will now be keen to see whether this upward price pressure gathered further traction last month amidst the broader reopening of the economy.</p>
<p><strong>OPEC Meetings</strong></p>
<p>Next week’s OPEC meeting will be a pivotal event for the oil market. The expectation is that the group will begin to formally back away from the supply restrictions implemented at the state of the year with supporters of the move arguing that the extra supply will be absorbed by the market as demand continues to recover. The pace and scale of the reversal of these measures will be the key to how the oil market reacts. If the reversal is deemed to swift or severe this could see oil prices heading lower once again.</p>
<p><strong>UK/EZ &amp; US PMI Readings</strong></p>
<p>The next batch of PMI readings is due next week. With these closely watched data releases having continued to recover with a solid upward trajectory over recent months, the market will be looking for a continuation of this trend. Any surprise weakness could raise doubts over the health of the recovery and pull risk assets lower.</p>
<h2>Keep An Eye On</h2>
<p><strong>COVID-19 Headlines</strong></p>
<p>The return of more lockdowns and travel restrictions this week has intensified the view that a second wave of the virus is underway. Should we see more countries and regions entering lockdown this could start to materially impact risk markets, driving strength back into gold prices.</p>
<p><b><i>Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.</i></b></p>
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