Forex Weekly Outlook June 8-12

The US dollar had the final word in a turbulent and volatile week.  G7 Meetings, a rate decision in New Zealand, employment data in Australia, as well as US retail sales, PPI and Consumer Sentiment stand out. These are the highlight events for this week. Join us as we explore the main market movers.

US Non-Farm Payrolls surprised with an excellent release showing a job gain of 280,000 in May. This was accompanied by a rise in wages widening participation and sent the dollar rallying. Things were more complicated beforehand for the greenback. The euro enjoyed the lack of worries from the ECB about bond volatility and the lack of rush to front load QE. Yet most of the EUR/USD surge was eventually erased. The pound suffered from a poor PMI while the Aussie only partially enjoyed the strong GDP report.  What’s next for currencies? We  can certainly agree with Draghi about getting used to volatility. Let’s start:

1. G7 Meetings: Sun-Mon. finance ministers and central bankers from 7 industrialized nations will meet in Germany to discuss the escalating Greek debt crisis as well as global economy and  foreign policy challenges. Russia will not participate in these meeting, but German Chancellor Angela Merkel noted there are many other ways to communicate with  the  Russian president. For example, the Normandy Format, where  Germany and France together with Russia and Ukraine  discuss how to resolve  the conflict in  Ukraine. The IMF will lead the negotiations with  Greece instead of a German-dominated negotiating forum.
2. Glenn Stevens speaks: Wednesday, 2:50. RBA Governor Glenn Stevens will speak in Melbourne after leaving us with a neutral bias in the last rate decision. Stevens may speak about the slower than expected pace of growth in Australian economy and the weakness in business capital expenditure in both the mining and non-mining sectors. However, the good news is that the Aussie depreciated in the past year, lowering key commodity prices.
3. Mark Carney speaks: Wednesday, 20:00. BOE Governor Mark Carney will speak in London. He may have to refer to the embarrassing revelation that the Bank of England is secretly planning for Britain’s exit from the European Union. “Project Bookend” was accidently delivered to an editor at  The Guardian  newspaper and was also kept from many of the BOE’s stuff. Market volatility is expected.
4. New Zealand rate decision: Wednesday, 21:00. The Reserve Bank of New Zealand maintained rates at 3.5% in April, in light of the rising uncertainties in Europe,  China  and Australia as well as, domestic dependence on accommodative monetary settings. However, the massive decline in world oil prices is expected to boost growth since Crude oil prices are almost 50 percent below their July 2014 level. Inflation remains low but is expected to pick up gradually. The Reserve Bank of New Zealand is expected to maintain rates in June but many expect a cut later this year.
5. Australian employment data: Thursday, 1:30. Australia’s unemployment rate in April increased mildly as expected, reaching 6.2%, after a fall of 2,900 positions in April. The unemployment in Australian remains above 6% in the last 11 months indicating sluggish growth in the Australian job market. Full-time employment decreased by 21,900, while part-time employment increased by 19,000. Australian employment market is expected to add 15,200 jobs while the unemployment rate is forecasted to remain at 6.2%.
6. US Retail sales: Thursday, 12:30. U.S. retail sales remained flat in April amid reduction in purchases of automobiles, indicating the US economy is struggling to get back on track after sluggish growth in the first quarter. Hopes for a strong rebound in the second quarter are fading in light of this weak release as well as other economic indicators. Retail sales excluding automobiles, inched 0.1%, while expected to rise 0.4%. The lukewarm data suggests the Fed will not hurry to raise rates anytime soon. Analysts expect U.S. retail sales to edge up 1.1% and forecast core sales to rise 0.7%.
7. US Unemployment claims: Thursday, 12:30. The number of Americans applying for unemployment benefits declined unexpectedly last week to 276,000, remaining below 300,000 for the 13^th week. The four-week average moved up 2,750 to 274,750.  The relatively small number of employment seekers indicates improved job security.  Economists hope for a solid job gain in May. Job growth remained strong despite temporary setbacks, suggesting employers were not deterred by the slowdown in the first quarter. The number of claims is expected to reach 277,000 this week.
8. US PPI: Friday, 12:30. U.S. producer prices resumed their descent in April as energy prices continued to decline. Producer price index fell 0.4%, falling for the third time this year after rising 0.2% in March. In the 12 months through April, producer prices fell 1.3% the biggest decline since 2010. The 0.7% drop in finished goods was the major cause for the decline in the PPI. Economists forecast a 0.4% rose in Producer prices this time.
9. US UoM Consumer Sentiment: Friday, 14:00. The University of Michigan’s survey showed Consumer sentiment declined in May to 90.7 from 95.9 in April, the lowest reading since November 2014. Consumers were more concerned about current economic conditions as well as the future. However, the Conference Board, a business group, reported that its index of consumer moral showed mild improvement in May. From 94.3 to 95.4. Nevertheless, The Michigan index is well above last year’s 81.9 indicating a pickup in consumption. Consumer sentiment is expected to grow to 91.3 in June.

*All times are GMT.

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

In this week’s podcast, we explain why EUR rallied on Draghi, what’s next, discuss oil and gas, run through the Plus500 story and preview next week’s events.

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