Forex Weekly Outlook – May 17-21

Figures from all over the world are expected this week, with Japanese GDP, European surveys and major US inflation figures standing out. As the focus remains on the Euro – threatening the “Lehman level”, we can be sure to get an exciting week. Let’s see what’s awaiting us this week.

One aspect of recent week’s trading is the dollar’s safe haven status. The yen also enjoys this status, but it wasn’t always this way. Here’s a side story of how the yen took this role from the Swissy. OK, let’s begin reviewing the events:

  1. TIC Long-Term Purchases: Published on Monday at 13:00 GMT. This figure represents the flow of cash to the US, and expresses confidence in the economy. After rising to 120 billion and dropping to 20, 47.1 billion dollars flowed last month, exceeding expectations. It’s expected to be higher this time – 50.5billion.
  2. British CPI: Published on Tuesday at 8:30 GMT. Inflation picked up in Britain, and passed the government’s target of 1-3%. Mervyn King dismissed this rise and blamed it mostly on oil prices. Indeed, prices didn’t get out of control and they now stand at an annual rate of 3.4%. A rise towards 4% will stir the expectations for a rate hike, but expectations are talking about 3.5%.
  3. German ZEW Economic Sentiment: Published on Tuesday at 9:00 GMT. This major survey finally recovered last month – after 6 months of drops that hurt the Euro. The rise to 53 points helped stabilize the Euro. Given the deteriorating debt troubles across the continent, this survey of 350 investors will probably drop this time.
  4. American housing figures: Published on Tuesday at 12:30 GMT. American building permits surprised with a rise to 690K last month, exceeding expectations after a few stable months. Also housing starts surprised, and both figures pushed the greenback together. If both figures go in the same direction again, this will boost the dollar.
  5. American PPI: Published on Tuesday at 12:30 GMT. Here we got confusing figures last time – producer prices rose by 0.7%, almost double the expectations, yet Core PPI rose by only 0.1%, signalling that prices remain very very stable.
  6. American CPI: Published on Wednesday at 12:30 GMT. Consumer prices are more important for policymakers. Here, both figures are almost deflationary. CPI rose by 0.1% last month, while Core CPI remained unchanged. A rise of at least 0.5% in Core CPI is needed for talks about a rate hike to stir.
  7. American FOMC Meeting Minutes: Published on Wednesday at 18:00 GMT. The last meeting of the FOMC saw no major changes. The pledge to keep the Federal Funds Rate at low levels for an extended period of time remained intact. In this release, we might learn about the members’ different opinions. This will probably cause choppy trading, but no long term effects.
  8. Japanese GDP: Published on Wednesday at 23:50 GMT. This is the first release for Japan’s Q1 GDP. The land of the rising sun saw 3 quarters of growth. Last quarter’s 1.1% growth was well received, yet deflation still weighs on the currency. A smaller growth rate is expected this time.
  9. American Unemployment Claims: Published on Thursday at 12:30 GMT. As always, this weekly release causes the markets to shake, as it gives a fresh view of one of the most important indicators for the economy. A small drop from 44K to 439K will probably be printed now.
  10. American Philly Fed Manufacturing Index: Published on Thursday at 14:00 GMT. This important indicator is a good representation of the recovery in the US – it has risen in the past three months, exceeding expectations each time. From 20.2 points printed last month, its predicted to edge up a little bit higher.
  11. Japanese rate decision: Published on Friday. Japan’s Overnight Call Rate isn’t expected to move from 0.1%. The BOJ Press Conference that accompanies the release is of high importance – the words heard there always move the markets just before the London session begins.
  12. German Ifo Business Climate: Published on Friday at 8:00 GMT. This major European survey climbed steadily in the past year. Also last month, a positive surprise was recorded when score passed the 100 point mark.  It will probably remain unchanged now.

That’s it for the major events this week. Stay tuned for specific currency coverages.

Further reading:

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