The US dollar was on the retreat as hopes for global coordination won fears, at least for now. The upcoming week features US retail sales, consumer sentiment, a rate decision in Japan among other important market-movers. Here is an outlook on the coming events that will shape forex trading this week.
A Spanish bailout is being cooked, and at least for now, this “bailout lite” could be positive for markets. How will they react? Last week Ben Bernanke did not provide QE3 hints in his speech before the Joint Economic Committee, in Washington DC, despite his worries from the European market and the growing acuteness of the US debt-ceiling crisis. He also undermined the relatively positive figure of the US unemployment claims blaming it on seasonal adjustments after a warm winter.Will Bernanke continue to evade the QE3 issue despite growing signs of a slowdown in the US economy?
- US Federal Budget Balance; Tuesday, 15:00. Federal Budget Balance deficit flipped to surplus for the first time in more than three years, reaching a $59 billion surplus from $198.2 deficit in March. Revenues increased in light of tax receipts and lower spending but this flip does not necessarily mark the start of a new trend. Moreover, economists believe that government borrowing will hit the ceiling sometime between late November 2012 and early January 2013. Federal Budget Balance is expected to reverse its recent surplus flip turning to a deficit of 107.2 .
- US Retail sales: Wednesday, 12:30. Retail sales went soft in April climbing 0.1%, following a 0.7% rise in March. Automobile sales contributed to this rise. Likewise core sales excluding motor vehicles sales increased 0.1% after a 0.8% jump in the previous month. On a yearly base retail sales increased 6.4% in April compared to 6.6% last year and Core sales gained 5.9% after 6.4% in the year before. Retail sales is expected to gain 0.1% while Core sales is expected to decline 0.1%.
- US PPI: Wednesday, 12:30. Lower energy cost caused a decline in US PPI with a decline of 0.2%, after a flat reading in March. Economists expected the figure to remain unchained. However the Core PPI rose by 0.2% after a 0.3% rise in March, amid increased prices for civilian aircrafts. These disappointing results add to the worries of the FOMC raising the issue of further monetary easing measures. PPI is expected to drop -0.6% while Core PPI is predicted to rise. 0.2%.
- NZ rate decision: Wednesday, 21:00.New Zealand’s central bank maintained interest rates at 2.50% with an encouraging announcement from RBNZ Governor Alan Bollard, claiming inflation is within the expected range and domestic economy is showing signs of recovery. However global outlook keeps posing a downside risk. Interest rate is predicted to remain 2.50%.
- Switzerland rate decision: Thursday, 7:30. The Swiss National Bank continued its lenient policy keeping its interest rate low at 0.25%, announcing they are prepared to buy foreign currency in unlimited quantities to combat the strong Swiss franc. No change is expected this time.
- US Unemployment Claims: Thursday, 12:30. Last week US job market rebounded following a three months rise in jobless claims. The number of people applying for U.S. unemployment benefits dropped to 377,000 from 389,000 in the previous week, while economists expected claims to reach 381,000. The United States has regained 43% of the jobs lost during and immediately after the recession. This week’s figure may suggest that hiring could improve in the next months. A slight rise to 378,000 is anticipated now.
- US Inflation data: Thursday, 12:30. CPI inflation remained flat in April after a 0.3% boost in March. Analysts expected a 0.1% rise. Meantime Core CPI, excluding food and energy products, increased 0.2%, in line with predictions. The recent drop in energy prices brought the headline numbers closer to the Fed’s inflation goal of 2% but Core CPI remains above the desired target. Core CPI is predicted to gain 0.2%, while CPI is expected to decline 0.2%.
- Japan Rate decision: Friday. The Bank of Japan kept monetary policy unchanged in May, but warned of ongoing risks to the country’s recovery prospects due to the deepening debt crisis in Europe. The BOJ announced yet again it would act to fight deflation through the use of monetary easing. As predicted the bank of Japan did not change rates leaving them at the minimum of 0-0.1%. No change is forecasted this time.
- US UoM Consumer Sentiment: Friday, 13:55. U.S. consumer sentiment surged to its highest level in more than four years, amid rising optimism about the job market and domestic spending. The index rose to 77.8 from76.4 in April. Despite the recent set back in job growth, many consumers reported hearing of new job gains rather than job losses, the survey revealed. Consumer spending has improved which is a good sign for the US economy. A decline to 77.5 is anticipated now.
*All times are GMT.
That’s it for the major events this week. Stay tuned for coverage on specific currencies
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar
- For the Swiss Franc, see the USD/CHF forecast.