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Week ahead: key events and currencies to watch in the coming week

Week ahead: key events and currencies to watch in the coming week

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The currencies market was relatively active last week, with the euro being the best-performer. The US dollar continued to lag against key currencies while the Hong Kong dollar was a bit stable as a political storm brew. Let us look at the five key economic events and currencies to watch in the coming week.

Central bank decisions

Central banks are very influential in the currencies market because of their ability to set interest rates and control money supply. In the coming week, three influential central banks will deliver their rates decision, which will have an impact on their respective currencies.

The Reserve Bank of Australia (RBA) will deliver its rates on Tuesday, followed by the Bank of Canada on Wednesday, and the European Central Bank (ECB) on Thursday. These decisions will come at a time when the three currencies have gained significantly against the US dollar. Therefore, the three will be key currencies to watch in the coming week.

Euro, Australian dollar, and Canadian dollar

Manufacturing and services data

The manufacturing and services sector are essential parts of most economies. As such, the financial market pays close attention to the performance of the two sectors. To do this, they track a number known as the Purchasers Managers Index (PMI) that is released by several organisations. The most credible organisations are Markit and Institute of Purchasing Managers (ISM).

On Monday, Markit will release the PMI data from around the world while ISM will release the manufacturing and non-manufacturing numbers on Monday and Wednesday respectively. Watch out for the data.

US employment data

As with the manufacturing and services sector, the financial market pays a close attention to the labour market. In the coming week, the most important employment data will be from the United States. On Wednesday, ADP, a payment processor will release the nonfarm payrolls data for the private sector. This will be followed by the official data from the US that will be released on Friday. Analysts expect that the US economy lost millions of jobs in May as most people continued to stay at home.

Hong Kong crisis

Hong Kong is an important city in Asia that has been going through a crisis in the past 12 months. The problems started when the city’s legislature attempted to pass a controversial extradition bill. This led to protests that paralysed the city’s economy. This week, the city has faced another crisis after the Chinese parliament bypassed the parliament and imposed its security laws.

In turn, the US ended the special relationship with the special administrative unit. For normal countries, such friction would lead to the weakening of the currency. But the Hong Kong dollar is highly managed by the central bank, which means that it will not move unless the bank intervenes to make it weaker. Other key currencies to watch because of the news are the Chinese yuan, Japanese yen, and Swiss franc.

Brexit talks

Finally, the British pound will be watched closely as the final round of Brexit talks resumes. These talks will focus on trade, fisheries, and energies and will be the last ones before the summit at the final week of the month. Analysts believe that the likelihood of a deal is so limited, which means that the British pound could be relatively volatile in the coming days.

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Crispus Nyaga
Crispus Nyaga
Crispus is a financial analyst with over 9 years in the industry. He covers the stock market, forex, equities, and commodities for some of the leading brands. He is also a passionate trader who operates his family account. Crispus lives in Nairobi with his wife and son.