The dollar had a superb week, riding on European fears to reach levels last seen in mid-March. Will we see a correction as many US figures are released? Or will the European news continue pushing the greenback higher? US retail sales, Philly Fed Manufacturing Index and the FOMC Meeting Minutes are the major market-movers this week. Here is an outlook on the major events awaiting us.
The failure to form a government in Greece and the troubles of the Spanish banking system have an impact that goes far beyond the euro-zone. In the US, Bernanke acknowledged the banking system has improved since the financial crisis making loans more available however, mortgage lending is still tight and will likely improve slowly than expected. Meanwhile, US jobless claims remained low dropped moderately from 368,000 to 367,000 last week re balancing the previous increases. Is the US economy beck on the right track? Let’s start:
- Euro-Zone GDP: Tuesday, France reports at 5:30, Germany at 6:00 and data for the whole euro-area is released at 9:00. The euro-zone is expected to enter an official recession (even if Draghi expects a recovery later on) with a second consecutive quarter of contraction in Q1, at a scale of 0.2%. Spain and Italy are already in recession. Germany will likely escape it with a very small growth rate of 0.1%. If Germany also disappoints and contracts, the impact will be a stronger yen and a stronger dollar across the board on risk averse movements.
- US Inflation data: Tuesday, 12:30. CPI inflation was lower in March gaining 0.3% although this reading was higher than the 0.2% increase predicted by analysts due to rise in energy products. Meanwhile, the core rate also improved rising 0.2% after gaining 0.1% in February. This rise was in line with predictions. This rise was mainly due to higher car prices. CPI is predicted to gain 0.1% while Core CPI is predicted to rise 0.2%.
- US Retail sales: Tuesday, 12:30. US retail sales improved considerably in March amid a boost of purchases, lifting growth rate for the first quarter. Retail sales rose 0.8% following 1.0% rise in February, while economists predicted only a small gain of 0.3%. Meanwhile excluding cars, retail sales climbed 0.8% last month after advancing 0.9 % in February. The strong figures suggest consumer spending remains strong and is one of the leading indicators for economic strength. Retail sales is expected to increase 0.2% and Core sales is predicted to climb 0.3%.
- US TIC Long-Term Purchases: Tuesday, 13:00. U.S. Treasury International Capital plunged more than predicted in February, amid a weak foreign demand for U.S. securities. Net foreign purchases of long-term securities reached USD10.1 billion after purchases of USD102.4 billion in January. Economists expected a smaller drop to USD41.3 billion in February. An increase to USD19.4 billion is anticipated.
- US Building Permits: Wednesday, 12:30. The number of building permits issued to privately-owned housing units increased to a seasonally adjusted annual rate of747,000 in March, higher than the 710,000 predicted and following 720,000 units in February indicating a strong housing market. A further gain of 730,000 units is expected now.
- US FOMC Meeting Minutes: Wednesday, 18:00. The last meeting in April didn’t contain any hints for QE3 and no change in policy. Bernanke did state in his press conference that “all the options are on the table”, but the chances seem to fade away. The minutes will show exactly how dovish the Fed is. Note that the previous meeting minutes disappointed investors and boosted the dollar.
- Japanese GDP: Wednesday, 23:50. Japanese preliminary figures for the fourth-quarter GDP showed the nation’s GDP shrank 0.6%, following 1.4%, revised to 1.7%, The preliminary figure was lower than the 0.3% decline predicted but the final score was revised up to -0.2% beating expectations. First quarter growth is expected to be 0.9%. This is closely watched by policymakers.
- US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial applications for jobless benefits declined unexpectedly last week to 367,000 following 368,000 in the prior week while analysts expected an increase of 371,000. This ongoing improvement suggests the labor market was having a temporary slowdown following continuous drops in jobless claims. A rise to 375,000 is predicted this time.
- US Philly Fed Manufacturing Index: Thursday, 14:00. U.S. Philadelphia region manufacturers’ index declined more than expected in April reaching 8.5 from12.5 in March. This is the biggest drop in six months. However analysts believe this is a temporary setback and the fall occurred due to lower growth in new orders and shipments. Improved consumer spending resulting in better employment market will provide further growth to the manufacturing sector. An increase to 10.6 is anticipated.
- G8 Meetings: Fri.-Sat. President Obama will host the 2012 G8 SummitatCamp David from May 18-19. The Group of Eight (G8) is a forum comprised of the eight of the world’s most industrialized nations, aimed discuss key topics and provide solutions for global issues. The G8 includes Canada, France, Germany,Italy, Japan, Russia, the United Kingdom and the United States. Russian Prime Minister Dmitry Medvedev will represent Russia at the G8 summit instead of President Vladimir Putin who is required to finalize appointments to his cabinet in Russia.
*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.