Forex Events to Watch: G8, Australian and Canadian Unemployment, US Trade Balance

07/09/2009 12:01 am EST

Focus: FOREX

Leaders of the Group of Eight (G8) are meeting in Italy to discuss the economic outlook. There are rumors that China will raise discussions about using a new, "super-sovereign" currency to replace USD as the dominant reserve currency and any official comments will trigger big moves in the forex market. The RBA and BOE will meet this week as well, and we believe that both meetings will be non-events since both central banks have recently taken a "wait and see" approach after reducing policy rates to unprecedentedly low levels. Moreover, Australia and Canada will release their respective employment reports for June. While unemployment rates probably increased further, we expect the pace of increases to have slowed down.

Important economic data to be released today and Friday are:

Australian Unemployment—June

The Australian unemployment rate is expected to have soared to 6% in June after rising to 5.7% in May, and following a surprising drop to 5.5% in April. We will also see a sharper decline in payrolls of around -30K during the month (May: -1.7K) as employers, particularly small firms, might have cut headcounts ahead of a change in workplace laws on July 1.

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Bank of England Meeting—July

We believe the MPC members will keep interest rates unchanged at 0.5% Thursday, while maintaining the current GBP125B asset-purchase program.

The asset-buying program will end in late July, but we think the probability for further extension is low unless there's a large downward revision of 1Q09 GDP (to be released next Tuesday), a report indicating that the previous capital injection failed to pass to the market, or an inflation report suggesting significant undershoot of the 3% target level.

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Reports for Friday, July 10

Canadian Unemployment Report—June

Payrolls are expected to have reduced by 30K in June, following a 41.8K contraction in the prior month. With the total labor force staying unchanged at around 18.4, the unemployment rate likely rose to 8.6% from 8.4% in May.

The pace of contraction in job losses should continue to slow down in the coming months as the economy in Canada seemed to have stabilized. That said, however, the view that the nation's unemployment rate will rise to 9% by the end of the year remains intact.

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US Trade Balance—May

The US trade deficit should have widened to $30B in May from $29.2B in the prior month as an increase in imported goods should have offset the increased exports. Despite continued contraction in trade balance, the pace has moderated.

Indices for both exports and imports probably climbed modestly after falling sharply for many months. Trade flow data released earlier also pointed to the positive side. In June's ISM manufacturing survey, the exports orders index rose to 49.5, while the import index climbed to 46.

By the staff at

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