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Economic Reports You Shouldn’t Miss this August |
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22nd Jun 2020

Economic Reports You Shouldn’t Miss this August

2020 has been marked by economic uncertainty and financial market volatility. The coronavirus pandemic has disrupted economic activity and made millions of people jobless globally. Although economies are recovering gradually, with restrictions being lifted in many parts of the world, the risk of further market crashes remain.

For starters, the stock markets have so far been somewhat disconnected with the real economic indicators. Secondly, as of July 20, volatility rose, with a fresh wave of COVID-19 cases in many states of the US and other countries. This could slow recovery in the second half of 2020.

Forex and crypto traders can find plenty of trading opportunities during the volatility that usually accompanies economic releases. While specific currency rates show huge fluctuations with high impact economic reports, the cryptocurrency markets tend to see a surge in trading volumes, when signs of economic gloom arise.

The months ahead are crucial in determining how soon the ill-effects of this pandemic can be overturned. Here are some of the major releases lined up for August 2020.
The pandemic originated in China in January 2020, ravaging its economy. However, it is one of the countries that has rebounded sharply and is expected to show signs of small positive growth by end of 2020. The Caixin Manufacturing PMI rose to a 6-month high of 51.2 in June 2020, from 50.7 in May, indicating economic expansion. This could be positive for many other economies that rely on China for export incomes and supply chain logistics. The forecast for July stands at 51.6, which could spark positive turns in the Asian markets and currencies.
The Bank of England kept its interest rate unchanged at a low of 0.1%, while expanding its quantitative easing programme by £100 billion. This resulted in a sharp sell-off in the GBP, bringing the GBP/EUR rates to a two-month low. Investors fear that the bank might be entertaining the idea of negative interest rates, with huge challenges for the UK economy and Brexit uncertainties lying ahead. The UK economy rose a mere 1.8% in May 2020, after a 20.3% decline in April. If the BoE lowers the interest rates further, huge volatility could be in store for the Pound Sterling.
The US NFP report is one of the major releases for forex and bitcoin traders, causing sharp volatility in the markets. The US economy has steadily added jobs since May 2020. In June, 4.8 million jobs were added, beating expectations of 3 million. However, the unemployment rate is still much higher than the pre-pandemic levels and the surge of fresh coronavirus cases is an additional threat. Also, the federal pandemic unemployment assistance, which provided millions of jobless Americans with $600 per week, is set to expire in July. The next report will be crucial. The market expects further job additions of 2.2 million. The report could bring huge volatility to the US Dollar, Yen, and US and Asian indices.
The annual inflation rate increased 0.6% in June 2020, following a four-year low in May of 0.1%. The market expects the inflation rate to increase by 0.7% annually, in July. This could drive up currencies, like the EUR/USD, usually offered by forex brokers at the lowest spreads, provided the Euro Area’s economic indicators remain positive.
The Eurozone economy declined 3.6% in Q1 2020, on a quarterly basis, with Italy and Spain looking at the steepest contractions in the same period. The annual contraction in Q1 was recorded at 3.1%. The Euro Area GDP is expected to contract 12.5% in Q2, as a result of lockdowns and subsequent economic disruptions. The IMF predicts huge contractions in economies like Germany, France and Italy. Traders should brace for severe volatility in the Euro and a surge in currencies like the US Dollar and Japanese Yen.
COVID-19 brought about the steepest contraction in the German economy in Q1, since 2009, at 2.2% (on a quarterly basis) and 2.3% (on a yearly basis). The market expects the contraction to be higher in Q2, at 10.5%. The German GDP is expected to decline 6.5% in 2020. Collapse in the export income of the largest economy in the Eurozone could spell trouble for global recovery. Forex and crypto traders can expect wild swings in the EUR/USD, EUR/GBP and the European indices.

Keep an eye on the economic calendar and be prepared for market moves associated with the major economic releases.