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Majors, US Dollar Forecast

Forex Weekly Outlook May 1-5

The US dollar ended April weaker against the the euro and the pound but stronger against the rest. What’s next? A busy week starts the month of May. US Manufacturing data, mployment figures from New Zealand, Canada as well as the important US NFP report, Rate decisions in Australia, New Zealand, and the US stand out. These are the highlights on forex calendar, Join us to explore these eventful week.

Poor US data resulted in a sluggish annual growth of 0.7% during the first three months of the year. This was the weakest GDP reading in almost three years. Mild consumer spending  was the main reason behind the lukewarm  figure. President Trump has promised to end the slow-growth history pledging to create a 4% growth. Since coming to office, Trump’s aim is to  get to 3% growth with tax reform  and improved trade regulations, to boost growth in the US economy. Analysts claim the chances of getting to 4% growth are very slim. Furthermore, Durable goods orders increased less than expected rising 0.7% while core orders slipped 0.2%. Jobless claims posted a higher than expected reading of 257,000, rising 14,000 from the previous week. Will this trend continue Let’s start:

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  1. US ISM Manufacturing PMI: Monday, 15:00. Manufacturing activity in the US weakened from a 2-1/2-year high in March amid mild declines in new orders and production, meanwhile the employment index expanded. The ISM index declined to 57.2 from 57.7 in February. The growth trend in manufacturing occurred mainly due to steady increases in the energy sector as crude oil prices boosted drilling activity. Production sub index declined to 57.6, new orders fell to 64.5 from 65.1 in February, while employment edged up to 58.9, the highest reading since June 2011. The manufacturing index is expected to register 56.6 in April.
  2. Australian rate decision: Tuesday, 5:30. The Reserve Bank of Australia kept rates on hold once again despite rising house prices. Rates remained at 1.50% in line with market forecast. Annual house prices soared in March to their highest level since May 2010 but according to the RBA, this alone does not justify a rate hike. Policymakers believe the cash rate will remained unchanged for the rest of this year.
  3. New Zealand employment data: Tuesday, 23:45. New Zealand’s unemployment rate increased more than expected in the fourth quarter of 2016 rising 0.3% to 5.2%. The higher unemployment was mainly due to an increase in the labor force participation rate, reaching 70.5% from the 70.2% forecasted. New Zealand added 19,000 jobs in the fourth quarter rising 0.8% from the previous quarter. Private-sector wages gained 0.4% on quarter, up 1.6% from the previous year. New Zealand’s agriculture-rich economy is gathering momentum with strong migration flows, solid commodity prices and record low interest rates. NZ job growth is expected to reach 0.8% and the unemployment rate is expected to decline to 5.1%.
  4. US ADP Non-Farm Employment Change: Wednesday, 13:15. According to the ADP release U.S. employment market added 263,000 workers in March, the highest figure since December 2014, suggesting further tightening of the labor market. The positive forecast supports the Fed’s intentions to raise rates at least twice by the end of this year. The ADP figures for March were in contrast with the more comprehensive non-farm payrolls release on Friday, which showed a disappointing 98,000 jobs gain for the month. The ADP reading is estimated to show a jobs gain of 178,000 during April.
  5. US ISM Non-Manufacturing PMI: Wednesday, 15:00. The U.S. service sector expanded less than forecasted in March falling to 55.2 from 57.6 in February. This was the slowest growth since October. The business activity index declined to 58.9 from 63.6 in the prior month, missing forecast of 61.5. The employment index fell to 51.6 from 55.2 a month before. New orders slipped to 58.9 from 61.2. The price index fell to 53.5 from 57.7. US service sector is expected to improve to 56.1 this time.
  6. US Crude Oil Inventories: Wednesday, 15:30. U.S. crude oil inventories declined sharply in the week to April 21 while stockpiles of gasoline and distillates soared last as refiners boosted production rates to the highest since November 2015. This was the third consecutive week of drawdowns in crude stocks preparing for the high-demand summer driving season. Demand for refined products remained weak for this time of the year, which may be a cause for concern in the coming weeks if demand fails to recover.
  7. US Federal Funds Rate: Wednesday, 19:00. The Federal Reserve hiked rates in March, for the second time in three months, increasing its benchmark interest rate to 1%. The increase was in line with market forecast. Investors expect the Fed will raise rates at least two more times this year. In the economic projections statement the Fed noted it expects three moves as the business investment strengthened mildly from the February meeting. GDP growth forecast for 2017 remains at 2.1% while 2018 edged up to 2.1%. Inflation is expected to tick to 1.9% from 1.8% in the prior meeting. However, despite the rate hike expectations Federal Reserve Chair Janet Yellen noted the Fed remains data-dependent and not interested in aggressive tightening. The Fed is not expected to change rates this time.
  8. US Unemployment Claims: Thursday, 13:30. The number of Americans filing new claims for unemployment aid increased more than expected in the week to April 22, reaching 257,000, following a reading of 243,000 in the previous week. Meanwhile, the four-week average of claims fell 500 to a two-month low of 242,250 indicating that labor market conditions continue to tighten. Furthermore, claims have now been below 300,000 for 112 straight weeks. The number of new jobless claims is expected to register 246,000 this week.
  9. Mario Draghi speaks: Thursday, 17:30. ECB President Mario Draghi will speak in Switzerland. Market volatility is expected.
  10. Stephen Poloz speaks: BOC Governor Stephen Poloz will speak in Mexico City where clues on future rate changes may be revealed.
  11. Canadian employment data: Friday, 13:30.  Canadian employment market expanded by 19,400 jobs in March and the unemployment rate edged up to 6.7% as more people entered the workforce. The upbeat report suggested Canada’s economic growth gathered momentum. The hefty jobs gain was nearly four times more the expected level of 5,700, continuing a three-month of increase. The positive data will make it difficult for the Bank of Canada to keep rates low in the coming months. However BOC Governor Stephen Polo zos still worried about the downside risks in the Canadian economy. Canadian employment market is expected to show a job creation of 20,000 with 6.7% unemployment rate.
  12. US Non-Farm Payrolls and Unemployment rate: Friday, 13:30. Nonfarm payrolls disappointed in March with a meager job creation of 98,000, following an upbeat ADP report of 263,000 jobs gain. However, the unemployment rate fell to a 10-year low of 4.5%. Analysts expected an addition of 180,000 positions for the month. The unexpected low figure could be explained by weather issues decreasing activity. Wage growth remained strong with an annual rise of 2.7% in average hourly earnings. Policy makers are closely monitoring the monthly payrolls report to see whether another rate increase in June is in order. The NFP for April is expected to register 194,000 new jobs in April.
  13. Janet Yellen speaks: Friday 18:30. Federal Reserve Chair Janet Yellen will speak in Providence about Women’s Participation in the Economy. Market volatility could be expected.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.

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Anat Dror

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer