U.S. Non-farm Payrolls Under The Spotlight, BOE and RBA to Hold Rates Unchanges

U.S. shares were mixed after the close on Friday with the Dow Jones Industrial Average adding 0.15% to hit a new all-time high, while the S&P 500 index and the NASDAQ Composite index losing 0.13% and 0.12%, respectively. Meanwhile, the U.S. dollar remained weak versus its rivals on the back of fresh U.S. political concerns.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, lost 0.49% at 93.31, trading near Thursday’s 13-month low of 93.00. The greenback was hit hard after Senate Republicans failed to pass a repeal of Obamacare, formally known as the Affordable Care Act, in a dramatic vote of 49-51 late Thursday night.

According to data released by the U.S. Bureau of Economic Analysis, U.S. gross domestic product rose 2.6% annual rate in the second quarter, in line with estimates. However, first quarter GDP was revised downwards to 1.2% from a previously estimated 1.4% increase. The economy grew 1.9 percent in the first half of 2017, which makes it unlikely that GDP would reach 2.5 percent for the full year.

In the week ahead, the U.S. Labor Department will release its July nonfarm payrolls report on Friday which is expected to show jobs growth of 183,000 this month, following an increase of 222,000 in June. Unemployment rate is forecast to dip to 4.3% from 4.4% while average hourly earnings might have risen 0.3% after gaining 0.2% a month earlier.

Upbeat data will support the case for higher interest rates at the second half of this year and in the following months, which in turn will help strengthen the greenback. On the contrary, a weak report would add to uncertainty over the economic outlook and prompt Fed officials to delay the plans with regards to policy normalization to next year.

Before the highly-awaited Non-farm Payrolls, U.S. data on Pending Home Sales due on Monday, manufacturing and service sector growth on Tuesday and Thursday will draw market attention. In addition, reports on personal income and spending, which includes the personal consumption expenditures inflation data, the Fed’s preferred metric for inflation, are scheduled to be published on Tuesday.

For the stock market, earnings season will continue with reports from Apple and Tesla about to garner most of the attention.

Turning the British Pound, the pair GBP/USD jumped to as high as $1.3150 before retreating to $1.3129, up 0.49% after the close on Friday. Next week, the Bank of England will announce its rate decision and publish its Quarterly Inflation Report on Thursday.

Economists predict the BOE will keep its key interest rate at a record-low 0.25 percent and leave the size of its quantitative-easing program unchanged on August 3 to shore up economic growth, though some are calling for a hike. BOE Governor Mark Carney is scheduled hold a press conference shortly after the announcement.

U.K economic data next week include readings on September manufacturing sector activity on Monday, a report on the construction sector on Tuesday and the service sector on Wednesday.

The manufacturing PMI is forecast to edge higher to 54.4 from 54.3 a month earlier, construction activity is expected to decline slightly to 54.2.0 from 54.8, while a survey on major sector services is forecast to rise to 53.7 from 53.4 last month.

Besides the BOE’s monetary meeting on Thursday, the RBA’s latest interest rate decision is due on Tuesday with most economists expecting the central bank to keep rates unchanged at the current record-low of 1.5% for the 11th straight meeting, as well as maintain its neutral policy stance.

The Euro extended its impressive rally, climbing 0.51% to close at $1.1737, not far from Thursday’s two-and-a-half year highs of $1.1777. The single currency has gained nearly 3% against the greenback during the month.

In the week ahead, the euro zone will publish flash inflation figures for July on Monday, which are forecast to show consumer prices rose 1.3% this month, unchanged from June and well short of the ECB’s target of just below 2%. The core figure, without volatile energy and food prices, meanwhile, is anticipated to hold at 1.1% from a month earlier.

After the inflation data, a preliminary report on second-quarter economic growth will be published on Tuesday. The region’s economy is forecast to expand 0.6% in the three-month period to June, equivalent to an annualized 2.4%.

Elsewhere, the China Federation of Logistics and Purchasing is to release data on July manufacturing sector activity on Monday (9:00PM ET Sunday). Analysts expect a modest decline to 51.6 from June’s three-month high of 51.7.

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