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Forex Weekly Outlook May 3-10 – BoE policy decision, US NFP loom big

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The FOMC remained in dovish mode, despite promising US numbers. The UK economy is gradually reopening, but the eurozone is still hampered by a slow vaccine rollout.

In April, German Inflation rose above the 2% level for the first time in two years. In the eurozone, CPI is expected to rise to 1.6% in April, up from 1.3%. German GDP fell by 1.7% in Q1 from the previous quarter, as Covid-19 caused a downturn in the economy.
Canada’s GDP posted a gain of 0.4% in February, down from 0.7% a month earlier.

The US dollar dipped after the FOMC meeting, as the Fed said it was premature to discuss tapering. US GDP rose 6.4%, beating the forecast of 6.1%. The robust reading was another sign that the US economic recovery is in full swing.

  1. US ISM Manufacturing PMI: Monday, 14:00. Manufacturing continues to show strong growth, as the economic recovery is galloping at a quick pace. The PMI improved to 64.7 from 60.8 in February and the March estimate stands at 6
  2. UK Manufacturing PMI: Tuesday, 8:30. Manufacturing continues to show strong growth. The PMI rose to 60.7 in April, up from 58.9. The upcoming reading is expected to confirm the initial release. 
  3. BoE Rate Decision: Thursday, 12:00. The BoE is widely expected to maintain the Official Cash Rate at 0.10% and asset purchases at GBP 895 billion. The economy is doing markedly better than the last meeting, which took place in March, due to a successful vaccine rollout. The bank is not expected to taper at the upcoming meeting, but if policymakers do make this move, the pound could rise significantly. The BoE is expected to maintain interest rates at 0.10%.
  4. US Employment Report: Friday, 12:30. The estimate for non-farm payrolls stands at 975 thousand, and a print above 1 million is certainly possible. Wage growth remains subdued, and the April estimate stands at 0.0%.

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US dollar forecast: Preview for the main foreign exchange events that will rock currencies ► focusing on major events and especially on publications in the USA, moving the US dollar (greenback). Here are some general data. Scroll down for the latest US dollar outlook

USD and forex general characteristics

The United States Dollar is the reserve currency of the world, partly due to its use in settling oil prices and other commodities. Foreign exchange pairs are divided into majors, minors, and crosses. Both majors and minors include the USD.

US economic indicators and political developments influence currencies more than anywhere else in the world. The decisions and statements by Federal Reserve officials make the biggest waves. The US economy is by far the largest in the world. US politics and policy also have an outsized impact on currencies.

The outlook consists of mostly US economic events but also key market-moving figures from other major economies. The euro-zone, the UK, and Japan stand out.

Recent USD Moves

The greenback suffered a bad start to the year: poor growth and scandals hurt the US dollar. Hopes for fiscal stimulus faded with the repeated failures to repeal Obamacare. Despite two rate hikes in the first half, the dollar struggled. Other economies outperformed America.

The second half already looks a lot different: economic growth reached 3% annualized and the Fed seems to stick to its plan to hike rates three times. In addition, Trump’s tax plan inspires markets, despite hurdles to pass it before Christmas.

Headwinds come from the political scandals. Low inflation also weighs on the dollar. If the “mystery” persists and wages do not accelerate, Janet Yellen and co. could refrain from further tightening. The new Fed Chair Jerome Powell will take office in February 2018, and he may not stick to the current plan of raising rates three times.

Latest weekly US Dollar forecast

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