Forex Weekly Outlook May 14-18 – Has the dollar peaked?

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The US Dollar had an exciting week amid inflation data and other market moving events. It reached new highs only to retreat. What’s next? The US retail sales, housing data, and a couple of GDP figures. Here are the highlights for the upcoming week.

US core inflation came out at 2.1% against 2.2% expected. This hurt the greenback and sent it down after it reached new multi-month highs against both the euro and the pound. Mixed euro-zone data did not cause too much harm while the Bank of England had a dovish decision that sent the pound lower. Trump’s abandoning of the Iran deal provided further support to oil prices but did not trigger other lasting movements in markets. The Canadian jobs report disappointed and sent the loonie lower after an otherwise positive week while the New Zealand dollar suffered from an open door to cut interest rates by the RBNZ.

Updates:
  1. German GDP: Tuesday, 6:00. The euro-zone growth dropped to 0.4% q/q in Q1 against 0.6% in Q4 2017 but this did not include the largest country. Nevertheless, the prospects are for a fall from the 0.6% level also experienced in Germany to lower levels of growth as the underlying data disappointed. A growth rate of 0.4% is forecast.
  2. UK jobs report: Tuesday, 8:30. The recent jobs report was disappointing on many fronts. Jobless claims rose by 11.6K, worse than expected in March. And while the unemployment rate dropped to 4.2% in February, wages remained stuck at 2.8% and did not rise to 3% as expected. While the BOE is not set to raise rates anytime soon, another disappointing report, especially on wages, could push a potential rate hike well into the future. Wages are expected to decelerate to 2.7% in March while jobless claims carry expectations for a rise of 13.3K in April. The unemployment rate is projected to remain at the lows of 4.2%.
  3. US Retail Sales: Tuesday, 12:30. In March, headline retail sales beat expectations with a rise of 0.6%. However, core sales rose by a more modest rate of 0.2% and the control group saw a downward revision. Consumption is a key part of the US economy and the report for April will begin shaping up expectations for Q2 growth. The April report is predicted to show a rise of 0.4% in headline sales and an increase of 0.5% in core retail sales.
  4. Japanese GDP: Tuesday, 23:50. Japanese figures do not often move markets but this is already an overview of the whole economy. The world’s third-largest economy grew by 0.4% q/q in the last quarter of 2017 according to the final release. Japan may occasionally see a contraction but does not often dip into a recession. A flat read, 0% is on the cards for this preliminary read for Q1.
  5. US Housing data: Wednesday, 12:30. US Building Permits stood at 1.35 million annualized units while housing starts were at 1.32 in March. In order for the report for April to have a significant impact, both indicators will have to move in the same direction: either both beating expectations or both disappointing. In the past they have often offset each other. Building permits are projected to stand at 1.35 million and housing starts to tick up to 1.33 million annualized units.
  6. Australian jobs report: Thursday, 1:30.Australia’s job report for March disappointed with a minor increase of only 4.9K positions. The unemployment rate remained at 5.5%. The wider picture is positive for Australia and the RBA expects growth to accelerate. April’s jobs report could provide some answers. A return to robust growth is expected with a gain of 20.3K jobs. The unemployment rate is forecast to remain unchanged at 5.5%.

*All times are GMT

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.