5 Things to Watch on the Economic Calendar This Coming Week

Investing.com - In the week ahead, market players will be focusing on the outcome of Thursday’s European Central Bank meeting to see if policymakers will step up monetary stimulus to counteract the negative economic shock from the Brexit vote.

Investors will also be looking to Friday’s survey data on euro zone business activity, as well as a report on German business confidence, for fresh indications on the health of the region’s economy in wake of Britain's vote to exit the European Union.

Meanwhile, the U.K. will stay in the spotlight as key economic indicators for the British economy are released.

In the U.S., investors will eye a pair of reports on the housing sector to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. European Central Bank policy meeting

The European Central Bank's interest rate decision is due at 11:45GMT, or 7:45AM ET, on Thursday, with most of the focus likely to be on President Mario Draghi's press conference45 minutes after the announcement.

The consensus is that the ECB will leave interest rates on hold, while Draghi is forecast to strike a dovish tone and perhaps hint at further stimulus to offset the hit to the economy from Britain's decision to leave the European Union.

2. Flash euro zone PMIs for June

The euro zone is to publish preliminary data on manufacturing and service sector activity for July at 08:00GMT, or 4:00AM ET, on Friday, amid expectations for a modest decline.

Ahead of the euro zone PMI's, France and Germany will release their own PMI reports at 07:00GMT and 07:30GMT respectively.

3. German ZEW business survey

The ZEW Institute will publish its July German business climate index at 09:00GMT, or 5:00AM ET, on Tuesday, amid expectations for a sharp deterioration from 19.2 to 9.1, as the Brexit shock hit business confidence. The current conditions index is also forecast to decline, from 54.5 to 52.0.

4. U.K. CPI, employment & retail sales data

The U.K. Office for National Statistics will release data on consumer price inflation for June at 08:30GMT, or 4:30AM ET, on Tuesday. Analysts expect consumer prices to rise 0.4%, after increasing 0.3% a month earlier.

At 08:30GMT, or 4:30AM ET, Wednesday, the ONS will publish the latest jobs report. The amount of people receiving jobless benefits is expected to rise by 4,000 in June, with theunemployment rate holding steady at 5.0%, while wage growth including bonuses is forecast to rise 2.3%.

On Thursday, the ONS will produce a report on June retail sales at 08:30GMT, or 4:30AM ET, amid expectations for a decline of 0.6% last month. Core sales are forecast to fall 0.7%, as British consumers are thought to have slowed down on their purchases both before and after the referendum.

The U.K. will close out the week with a reading on July manufacturing sector activity at 08:30GMT, or 4:30AM ET, Friday. The manufacturing PMI is forecast to inch down to 49.4 from 52.1 a month earlier.

The Bank of England held off from cutting rates last week, but hinted that it will ease monetary policy at its next meeting in August as it devises the exact size and nature of its stimulus measures.

5. U.S. housing data

The Commerce Department is to publish a report on housing starts and building permits for June at 12:30GMT, or 8:30AM ET, on Tuesday. The data could show that permits rose 0.6%to 1.150 million last month, while housing starts are forecast to inch up 0.5% to 1.170 million.

On Thursday, the National Association of Realtors is to release data on existing home sales for June at 14:00GMT, or 10:00AM ET, amid forecasts for a decline of 0.7% to 5.47 million.

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Commodity Prices and Currency Movements

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Predicting the next move in the markets is the key to making money in trading, but putting this simple concept into action is much harder than it sounds. Professional forex traders have long known that trading currencies requires looking beyond the world of FX. The fact is that currencies are moved by many factors - supply and demand, politics, interest rates, economic growth, and so on. More specifically, since economic growth and exports are directly related to a country\'s domestic industry, it is natural for some currencies to be heavily correlated with commodity prices. The top three currencies that have the tightest correlations with commodities are the Australian dollar, the Canadian dollar and the New Zealand dollar. Other currencies that are also impacted by commodity prices but have a weaker correlation are the Swiss franc and the Japanese yen. Knowing which currency is correlated with what commodity can help traders understand and predict certain market movements. Here we look at currencies correlated with oil and gold and show you how you can use this information in your trading.

Figure 1

 Figure 2

 Figure 3

Oil and the Canadian Dollar

Over the past few years, the price of commodities has fluctuated significantly. Oil, for example, surged from $60 a barrel in 2006 to a high of $147.27 a barrel in 2008 before plummeting back below $40 a barrel in the first quarter of 2009 and rising to above $80 in 2011. Similar volatility can be seen in the price of gold , which hit $1600 an ounce in June 2011 and then a new high of over $1,800 an ounce a few months later in August 2011. With many countries around the world in recession, the trend of commodity prices can mean the difference between a deeper downturn and a faster recovery. Knowing which currencies are affected by what commodities will help you make more educated trading decisions.

Oil is one of the world\'s basic necessities - at least for now, most people in developed countries cannot live without it. In February 2009, the price of oil was nearly 70% below its all-time high of $147.27 set on July 11, 2008. A decline in oil prices is a nightmare for oil producers, while oil consumers enjoy the benefits of greater purchasing power. This is a complete 180-degree change from the situation at the beginning of 2008, when record-high oil prices put a big smile on the faces of oil producers while forcing oil consumers to pinch pennies. There are a number of reasons to explain the fall in oil prices, including a stronger dollar (oil is priced in dollars) and weaker global demand. As a net oil exporter, Canada is severely hurt by declines in oil, while Japan - a major net oil importer - tends to benefit.

Between the years 2006-2009, for example, the correlation between the Canadian dollar and oil prices was approximately 80%. On a day-to-day basis, the correlation can break, but over the long term it has been strong because the value of the Canadian dollar has good reason to be sensitive to the price of oil. Canada is the seventh-largest producer of crude oil in the world and continues to climb up the list, with production in oil sands increasing regularly. In 2000, Canada surpassed Saudi Arabia as the United States\' most significant oil supplier. Unbeknownst to many, the size of Canada\'s oil reserves is second only to those in Saudi Arabia. The geographical proximity between the U.S. and Canada, as well as the growing political uncertainty in the Middle East and South America, makes Canada one of the more desirable places from which the U.S. can import oil. But Canada does not service only U.S. demand. The country\'s vast oil resources are beginning to get a lot of attention from China, especially since Canada stumbled upon a new stash of oil after a reclassification of its Alberta oil sands to the "economically recoverable" category.

Figure 1 shows the clearly positive relationship between oil and the Canadian loonie. In fact, it should come as no surprise that the price of oil actually acts as a leading indicator for the price action of the CAD/USD. Since the traded instrument is the inverse, or USD/CAD, it\'s important to note that based on the historical relationship, when oil prices go up, USD/CAD falls and when oil prices go down, USD/CAD rises.

Oil and the Japanese Economy

At the other end of the spectrum is Japan, which imports nearly all of its oil (compared to the U.S., which imports approximately 50%). As of 2011, it is the world\'s third-largest net oil importer behind the U.S. and China. Japan\'s lack of domestic sources of energy, and its need to import vast amounts of crude oil, natural gas and other energy resources, make it particularly sensitive to changes in oil prices. Japan also lacks the flexibility to switch to nuclear power because it is a huge net importer of uranium for its nuclear power plants. As of 2008, the country\'s dependence on imports for primary energy stood at more than 84%. Oil provided Japan with 49% of its total energy needs, coal with 20%, nuclear power 13%, natural gas 14%, hydroelectric power 3% and renewable sources a mere 1%. Therefore, when oil prices skyrocket, the Japanese economy suffers. (Hedge against rising energy prices and diversify your portfolio.

An Attractive Oil Play: CAD/JPY

Looking at this from a net oil exporter/importer perspective, the currency pair that tops the list of currencies to trade to express a view on oil prices is the Canadian dollar against the Japanese yen. 

Figure 2 illustrates the tight correlation between oil prices and CAD/JPY. More often than not, oil prices tend to be the leading indicator (as with USD/CAD) for CAD/JPY price action with a noticeable delay. As oil prices continued to fall during this period, CAD/JPY broke the 100 level to hit a low of 76.

Going for Gold

Gold traders may also be surprised to hear that trading the Australian dollar is just like trading gold in many ways. As the world\'s third-largest producer of gold, the Australian dollar had an 84% positive correlation with the precious metal between 1999 and 2008. Generally speaking, this means that when gold prices rise, the Australian dollar appreciates as well. The proximity of New Zealand to Australia makes Australia a preferred destination for exporting New Zealand goods. Therefore, the health of New Zealand\'s economy is closely tied to the health of the Australian economy, which explains why the NZD/USD and the AUD/USD have had a 96% positive correlation over the same time period. The correlation of the NZD/USD with gold is slightly less than that of the Australia dollar but is still strong at 78%.

Figure 3: A look at the correlation between the price of gold and the price action in the NZD/USD from January 2005 to March 2009

Trading Currencies as a Supplement to Trading Oil or Gold

For seasoned commodity traders, it may also be worthwhile to look at trading currencies as an alternative or a supplement to trading commodities. In addition to being able to capitalize on a similar outlook (e.g. higher oil), traders may also be able to earn interest if they are on 2% margin or higher with most brokers. When trading currencies, you are dealing with countries, and countries have interest rates, of course. For example, a trader who may have bought the AUD/USD in March 2009 would be able to earn up to 3% in interest income if Australian interest rates remained at 3.25% and U.S. interest rates remained at 0.25% for the entire year. The 3% comes from taking Australia\'s central bank rate, which is the amount earned, and subtracting the nearly 0% rates paid for shorting the U.S. dollar. These are unleveraged rates, which mean that with 10 times leverage, for example, net of any exchange rate changes, the interest income would be that much higher. Leverage also makes the trade riskier, which means that if the trade turns against you, losses will be larger.A weaker, but still important, correlation is that of gold prices and the Swiss franc. The country\'s political neutrality and the fact that its currency used to be backed by gold have made the franc the currency of choice in times of political uncertainty. From January 2006 until January 2009, USD/CHF and gold prices had a 77% positive correlation. However, the relationship broke down somewhat in September 2005 as the U.S. dollar decoupled from gold price movements.

Along the same lines, if you shorted AUD/USD to express a short gold view, you would end up paying interest. If you\'re a commodity trader looking for a bit of a change from the usual pro gold trade (for example), commodity currencies such as the AUD/USD and NZD/USD provide good opportunities worth looking into.

Conclusion

If you want to trade commodity currencies, the best way to use commodity prices in your trading is to always keep one eye on movements in the oil or gold market and the other eye on the currency market to watch how quickly it responds. Due to the slightly delayed impact of these movements on the currency market, there is generally an opportunity to overlay a broader movement that is happening in the commodity market to that of the currency market. Bottom line: It never hurts to be more informed about commodity prices and how they drive currency movements.

Read original article HERE.

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Movie Time - FLOORED The Complete Documentary Film

For over 150 years, The Chicago Trading Floors have been home to the most primal method of buying and selling. In 1997, more than 10,000 people traded on the floors. Later that year, computer trading emerged. Today, about 10% remain.

Enjoy while understanding the real underlying elements of the marketplace and trading activities !

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5 Things to Watch on the Economic Calendar This Coming Week

Investing.com - In the week ahead, market players will be turning their attention to key economic data out of China, with Friday’s second quarter GDP report in the spotlight.

Thursday’s rate decision and monetary policy meeting minutes from the Bank of England will also be in focus, amid mountings expectations the central bank will step up monetary stimulus to counteract the negative economic shock from the Brexit vote.

In the U.S., investors will eye retail sales and inflation data to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.

This week also marks the start of the second quarter earnings season in the U.S.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. China second quarter GDP

China is scheduled to release data on second quarter gross domestic product at 2:00GMT on Friday, or 10:00PM ET, Thursday. The report is expected to show the world's second largest economy grew 6.6% in the three months ended in June, slowing from growth of 6.7% in the preceding quarter, which was the slowest pace in a quarter of a century.

The Asian nation will also publish data on June industrial production, fixed asset investment and retail sales along with the GDP report.

Additionally, China is to publish trade figures on Wednesday. The Asian nation published weaker than expected inflation data over the weekend, reinforcing views that more government stimulus steps will be needed to support the economy.

2. Bank of England rate decision

The Bank of England will release its rate decision as well as minutes of its Monetary Policy Committee meeting at 11:00GMT, or 07:00AM ET, on Thursday.

Expectations for more easing mounted after BoE Governor Mark Carney recently suggested interest rate cuts and additional stimulus will likely be needed over the summer to offset the hit to the economy from Britain's decision to leave the European Union.

A Reuters survey published last week showed that 17 out of 52 economists polled predicted a cut to 0.25% from the current 0.5%, while another two said rates will be chopped to zero. The remaining two-thirds said the rate would be held steady at 0.5%, with policymakers more likely to wait until August to make any move.

Asked more broadly how the BoE was likely to respond to Brexit, a majority of economists who answered the question thought a combination of lower rates and more asset purchases was likely.

3. U.S. June retail sales report

The Commerce Department will publish data on June retail sales at 12:30GMT, or 08:30AM ET, Friday. The consensus forecast is that the report will show retail sales inched up 0.1% last month, after rising 0.5% in May. Core sales are forecast to increase 0.4%, after gaining 0.4% a month earlier.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.

4. U.S. inflation data for June

The Commerce Department will publish June inflation figures at 12:30GMT, or 8:30AM ET, Friday. Market analysts expect consumer prices to ease up 0.3%, while core inflation is forecast to increase 0.2%.

On a yearly base, core CPI is projected to climb 2.3%. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

Rising inflation would be a catalyst to push the Fed toward raising interest rates.

5. U.S. second quarter earnings season kicks off

The focus on Wall Street will shift to corporate earnings next week after a strong June jobs report on Friday gave investors confidence that the U.S. economy was on stable footing and left the S&P 500 within a whisper of a new closing record high.

Earnings next week are expected from big banks JPMorgan Chase (NYSE:JPM), Citigroup(NYSE:C) and Wells Fargo (NYSE:WFC) as well as other financial companies such as BlackRock Inc (NYSE:BLK) and PNC Financial Services (NYSE:PNC).

Earnings for the financial sector are expected to drop 5.4% in the second quarter. Financials have been the worst performing of the 10 major S&P sector groups this year, down nearly 6%, as they were hit by reduced expectations for a U.S. interest rate hike by the Federal Reserve and uncertainty in the wake of the vote by Britain to leave the European Union, or "Brexit."

Other notable earnings expected next week include Alcoa (NYSE:AA), Yum! Brands (NYSE:YUM), Delta Air Lines (NYSE:DAL) and CSX Corp (NASDAQ:CSX).

Second quarter earnings overall are expected to decline 4.7%, the fourth straight quarter of negative earnings.

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Happy Eid Mubarak to All Muslimin and Muslimah... Maaf Zahir Batin

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5 Things to Watch on the Economic Calendar This Coming Week

Investing.com - In the week ahead, market players will be shifting their attention slightly away from Brexit-related news and more towards economic fundamentals and U.S. monetary policy, with the June nonfarm payrolls report and FOMC meeting minutes in the spotlight. There is also ISM services data on Wednesday.

U.S. financial markets will be closed on Monday for the Independence Day holiday.

Elsewhere, in the U.K., market players will be eyeing the release of the Bank of England’s financial stability report for fresh clarity on the health of the U.K. banking sector in wake of Britain’s shock decision to leave the European Union.

Outside the G7, traders will be awaiting a monetary policy announcement from the Reserve Bank of Australia on Tuesday.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. June U.S. Employment Data

The U.S. Labor Department will release its June nonfarm payrolls report at 12:30GMT, or 8:30AM ET, on Friday.

The consensus forecast is that the data will show jobs growth of 175,000 last month, following an increase of 38,000 in May, the unemployment rate is forecast to inch up to 4.8% from 4.7%, while average hourly earnings are expected to rise 0.2% after gaining 0.2% a month earlier.

An upbeat employment report will point to an improving economy and support the case for higher interest rates in the coming months, while a weak report would add to uncertainty over the economic outlook and push prospects of tighter monetary policy further off the table.

2. Fed FOMC Meeting Minutes

The Federal Reserve will release minutes of the June policy meeting on Wednesday at 18:00GMT, or 2:00PM ET, as investors search for some clarity on where the U.S. central bank stands on its path toward rate hikes.

The Fed kept interest rates unchanged following its meeting on June 15 and dialed back forecasts for how fast it will raise rates over the next couple of years, citing concerns over the economic outlook.

3. U.S. June ISM Services PMI

The U.S. Institute of Supply Management is to release data on June service sector activityat 14:00GMT, or 10:00AM ET, on Wednesday. The gauge is expected to rise 0.4 points to 53.3. Anything above 50.0 signals expansion.

4. Bank of England Financial Stability Report

The Bank of England’s financial stability report will be released on Tuesday at 9:30GMT, or 5:30AM ET. The publication will take a detailed look at the risks faced by the U.K. banking sector following the referendum vote and the underlying risks to the economy. BoE Governor Mark Carney will hold a press conference shortly after the release of the report.

5. Reserve Bank of Australia Rate Decision

The RBA's latest interest rate decision is due on Tuesday at 4:30GMT, or 12:30AM ET. Most economists expect no policy change, after the central bank left rates on hold at a historic low of 1.75% at its previous meeting and held off from indicating that more monetary easing is on the cards.

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Perspective: Islamic Forex Trading by Dr Mohammed Obaidullah

[CLICK HERE TO READ ABOUT HIS RESEARCH ON ISLAMIC FOREX TRADING]

[CLICK HERE TO REACH HIM AT LINKEDIN]

Dr Mohammed Obaidullah has been serving the Islamic Research and Training Institute of the Islamic Development Bank (IsDB) Group at Jeddah, Saudi Arabia as a Senior Economist and Training Specialist since 2006. He recently held the position of 2nd Yayasan Tun Ismail (YTI) Chair Professor in Islamic Finance at the Islamic Sciences University Malaysia (USIM) at Kuala Lumpur, Malaysia (Sept 2014-Aug 2015).

Dr Obaidullah has also served as Associate Professor, King Abdulaziz University, Jeddah, Kingdom of Saudi Arabia (2002 - 2006); International Islamic University Malaysia, (2000 - 2001); and Xavier University, India (1995 - 2002). Dr Obaidullah is an ADBI Certified Trainer of Trainers in Microfinance (2013), He holds a Ph.D. and a Master of Business Administration (MBA) degree from India. Dr Obaidullah has served as the Secretary General, International Association of Islamic Economics (2004-08). He is the Founder of IBF Net: Islamic Business and Finance Network, an online community founded in 1999. Currently, his passion is to write a blog on Islamic social finance focusing on zakah, awqaf, hajj and not-for-profit microfinance. He writes at http://www.sadaqa.in

Some of his recent contributions:

Islamic Social Finance Report 2014 and 2015 (Project Leader and Principal Author)

Awqaf Development and Management, Islamic Research and Training Institute, IDB, Jeddah, Saudi Arabia (2013) 

Zakah Management for Poverty Alleviation, Islamic Research and Training Institute, IDB, Jeddah, Saudi Arabia (2012) 

Introduction to Islamic Microfinance, IBF Net, New Delhi, 2006 

His book Islamic Financial Services, Scientific Publishing Centre, King Abdulaziz University, Jeddah, Saudi Arabia, 2005 has over 200 citations as per Google Scholar.

Editor Notes:

You are advised to do your own research and decide on which fatwa you would bias to. If in doubt, it is recommended NOT to participate in Forex Trading. Otherwise, the above research by Dr Mohammad is sufficient to put us in faith of the Halal-ness of Forex profit as our income. WALLAHu A'lam.

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