Forex Weekly Outlook April 20-24 – COVID-19 Sends Global Economy into Full Retreat

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The Covid-19 outbreak continues to create havoc with the global economy, as lockdowns across the world have paralyzed the major economies. We’ll get a look at inflation and employment reports in the UK as well as the U.S. Manufacturing PMI.

China’s economy contracted by 6.8% in Q1, compared to a gain of 6.0% in Q4. This was worse than the estimate of -6.2 percent. Inflation remains low in the eurozone, as CPI came in at 0.7%, while the core reading showed a gain of 1.0 percent. This confirmed the initial readings.

In the U.S., consumer spending plunged in March. Retail sales declined by a staggering 8.7%, worse than the estimate of an 8.0 percent decline. The core reading fell by 4.5%, beating the forecast of 4.9 percent. The employment market remains in disarray, as unemployment claims topped the 5-million mark.

  1. RBA Monetary Policy Meeting Minutes: Tuesday, 1:30. The RBA minutes will provide details of the March policy meeting. At that meeting, the bank maintained the cash rate at 0.25%.  A pessimistic assessment by policymakers in the minutes could weigh on the Aussie.
  2. UK Employment Reports: Tuesday, 6:00. The outlook for the UK job market is bleak, as the Covid-19 outbreak has paralyzed the UK economy. Wage growth improved to 3.1% in January, up from 2.9% a month earlier. The estimate for February stands at 3.0%. Unemployment claims jumped to 17.3 thousand in February, up from 5.5 thousand and much higher than the estimate of 6.2 thousand. The unemployment rate in January edged up to 3.9% from 3.8%, its highest level since June. No change is expected in the unemployment rate.
  3. UK Inflation: Wednesday, 6:00. With economic activity sharply lower, inflation levels are expected to fall. CPI edged lower to 1.7% in February, down from 1.8%. The estimate for March stands at 1.5%. Core CPI rose to 1.7%, up from 1.6%, The March forecast is 1.6%.
  4. Canadian Inflation: Wednesday, 12:30. Consumer inflation rose 0.4% in February, up from 0.3%, This marked its highest level since July. The core figure improved to 0.7%, up from 0.4% a month earlier. Will the upswing continue in the upcoming release?
  5. U.S. Unemployment Claims: Wednesday, 12:30. Jobless claims was above 5-million last week, and analysts are bracing for another huge number, as the Covid-19 outbreak has locked down millions of employees.
  6. U.S. Manufacturing PMI: Wednesday, 12:30. Manufacturing PMI in March slowed to 49.1, falling below the 50-level which separates contraction from expansion. We now await the initial reading for April.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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