The upcoming week has a few key economic events for the FX market. The main highlights are the U.S. ISM services PMI, the BoE monetary policy announcement, and Canadian labor data. Monday is quiet, but on Tuesday, the ISM Services PMI in the U.S. will be released. On Wednesday, we’ll focus on New Zealand’s quarterly employment change and unemployment rate. Thursday brings the BoE’s policy decision, while the U.S. will share its weekly unemployment claims. Canadian employment changes and unemployment rate data will come out on Friday. Throughout the week, we expect comments from various FOMC members.

U.S. Economic Outlook

In the U.S., the ISM services PMI is projected to be 51.5, up from 50.8. Rising costs are a worry, as the services sector has a hard time picking up speed, with high prices paid. A cautious outlook persists due to weak demand and mixed signals from the labor market. In New Zealand, an employment change of -0.1% is expected, with unemployment likely increasing to 5.3%. If the labor data is weak, it could lead to a policy rate cut at the next meeting. The BoE is expected to lower rates by 25 basis points, despite inflation concerns. In Canada, employment changes are anticipated to be 15.3K, with unemployment expected to be at 7.0%, reflecting an uneven labor market. While manufacturing is struggling, the services sector continues to create jobs. This week, we will be paying close attention to the U.S. ISM services PMI on Tuesday for clues about economic health. Recent flash PMI data for July suggested a reading around 52.2, which is better but still shows slowing momentum compared to earlier in the year. With high input costs and weak demand, it might be wise to consider options that bet on limited gains in U.S. equity indices in the coming weeks. For the New Zealand dollar, we are focused on the anticipated interest rate cut from the Reserve Bank of New Zealand. Wednesday’s employment data will be crucial; if the unemployment rate rises to the expected 5.3%, it would reach its highest level in over three years and likely confirm the rate cut. This suggests a straightforward strategy of buying put options on the kiwi or shorting NZD futures ahead of the decision.

Bank of England Rate Decision

The Bank of England is set to cut rates by 25 basis points this Thursday, a move that the market has largely anticipated. With UK inflation in June steady at 3.1%, the real event will be the Bank’s future guidance rather than the cut itself. This opens up opportunities for volatility trading, using straddles or strangles on the British pound or FTSE 100 index futures around the announcement. In Canada, Friday’s labor data will likely reflect a significant slowdown, with only 15.3K new jobs expected. If the unemployment rate rises to 7.0%, it would mark a new multi-year high, confirming a cooling economy. Given the ongoing struggles in goods-producing sectors, traders might think about selling call options on the Canadian dollar, expecting any strength to be capped. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now