Forex Weekly Outlook May 2-6

The US dollar suffered quite a bit and the yen was a shining star in the closing week of April. Draghi’s speech, A rate decision in Australia,    Draghi’s speech and a full build up to the Non-Farm Payrolls stand out this week. These and more are on our weekly outlook. Join us as we explore these market movers.

The Federal Reserve kept interest rates unchanged  and while it did sound more optimistic, it seems to be in no rush for a hike in June. This weighed on the dollar and the unimpressive GDP read did not help either. The yen rallied hard on the lack of new easing from the BOJ with a very significant drop in USD/JPY. The euro also rallied but met resistance, while oil prices gave a boost to the Canadian dollar.

1. Mario Draghi speaks: Monday, 14:00. ECB President Mario Draghi will speak in Frankfurt. He may refer to the recent criticism from Germany that the ECB’s low rates were squeezing savers. Draghi defended this policy of printing money and keeping borrowing costs at rock bottom saying this strategy proves to be effective. Draghi also called on euro zone governments to help get the region’s sluggish economy on a more solid footing through economic reforms. Market volatility is expected.
2. US ISM Manufacturing PMI: Monday, 14:00. US manufacturing sector regained strength in March, amid a sharp rise in new orders. The ISM index edged up from 49.5 to 51.8 in March. The reading was better than the 50.8 expected by analysts.  The employment index declined to 48.1 from 48.5 a month earlier, but new orders soared to 58.3 from 51.5. Furthermore, the prices paid index increased to 51.5 from 38.5 exceeding expectations. March was the first month of expansion in manufacturing activity since August 2015.  The index is expected to decline slightly to 51.6 this time.
3. Chinese  Caixin Manufacturing PMI: Tuesday, 1:45. China’s manufacturing sector is in contraction territory according to this independent measure. The good news is that the situation is  improving. A tick up from 49.7 to 49.8 is on the cards now. This has a significant impact on the Australian dollar and also on other currencies as China is the world’s second largest economy.
4. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia maintained the  official cash rate at a record low 2% for a 10th straight meeting. RBA governor Glenn Stevens stated that low inflation may prompt another rate cut to boost economic activity.  The decision was widely anticipated. The RBA seemed a bit less worried about the global outlook while domestically the economy is continuing to stabilize following the mining investment boom. No change is expected.
5. NZ employment data: Tuesday, 22:45. New Zealand’s labor market recovered in the last quarter of 2015 as unemployment plunged to a six-year low of 5.3% from 6% in the third quarter. However, the sharp decline in unemployment was also facilitated by a 0.2% fall in labor market participation. New Zealand work force increased by 0.9% to 2.369 million during the quarter. Analysts expected unemployment to rise to 6.1% and job growth to rise 0.8%. Private sector wages grew by 0.4% , a bit softer than the 0.5% rise anticipated. New Zealand employment market is expected to increase by 0.6% in the first quarter while the unemployment rate is estimated to rise to 5.5%.
6. US ADP Non-Farm Employment Change: Wednesday, 12:15. U.S. private sector added 200,000 jobs in March, beating forecasts of 195,000. Private payroll figures in February were revised down to 205,000 from an originally reported 214,000 increase.The ADP reports comes ahead of the major employment release from the U.S. Labor Department, which includes both public and private-sector employment. US private sector is expected to add 205,000 new jobs in April.
7. US ISM Non-Manufacturing PMI: Wednesday, 14:00. The US ISM Non-manufacturing PMI index edged up to 54.5 in March from 53.4 in the previous month, rising more than the 54.1 forecast.  The reading shows the non- manufacturing sector is in expansion for 74 months. However, despite the positive figures Non-manufacturing PMI index has been declining since peaking in July 2015, where the index stood at a multi-year high of 60.3%. The report shows business conditions are mostly positive and that the economy is stable and will continue on a course of slow, steady growth. The non-manufacturing PMI is expected to register a gain of 54.9 in April.
8. US Crude Oil Inventories: Wednesday, 14: 30. Us oil inventories climbed by 2 million barrels last week, reaching an all-time peak of 540.6 million barrels. Oil prices edged up about 3%, hitting new highs for 2016 as the dollar weakened after the Federal Reserve announced it would keep U.S. interest rates unchanged. Analysts expected a rise of 1.4 million barrels. Economists believe the recent rose in inventories is fueled by the weakness on the dollar.
9. US Unemployment Claims: Thursday, 12:30. The number of Americans filing new claims for unemployment benefits rose last week by 257,000 but remained at a  historically low level  consistent with a robust labor market. The number of claims increased by 9,000 from the week before, broadly in line with market forecast. The labor market continued to post healthy gains despite worries about the broader slowdown in  U.S. economic growth  in early 2016.  The number of new claims is expected to reach 261,000 this week.
10. Canadian employment data: Friday, 12:30. Canada’s labor market created 40,600 jobs in  March, reducing the unemployment rate from 7.3% in February to 7.1%. It was the largest monthly increase since October 2015. 35,300 positons were full time, 65,100 jobs were created in the private sector, public-sector positions fell by 2,600, and 74,700 net new positions were  in the  services sector.  The country’s youth unemployment rate  crept up  13.4 per cent last month, from 13.3 per cent in February. The report also showed that self-employed positions across Canada  increased 22,000 last month, while the net number of employee jobs increased by 62,600.Canadian Job market is expected to grow by only 200 jobs while the unemployment rate is expected to rise to 7.2%.
11. US Non-Farm Payrolls: Friday, 12:30. US monthly employment release showed solid expansion in March with a rise in wages, indicating the economy remains resilient signaling the Fed to proceed with its gradual rate raise plan. Nonfarm payrolls increased 215,000 in March following a 242,000 addition in the previous month. Average hourly earnings edged up seven cents. However, the unemployment rate increased to 5.0% from an eight-year low of 4.9% posted in February, since more Americans continued returned to the labor force, a positive sign of confidence in the jobs market. The Fed has downgraded its economic outlook amid cheap oil prices and the strong dollar, saying it is appropriate for policymakers to “proceed cautiously in adjusting policy.” However the positive figures in March show a positive trend in the US economy. US monthly Job growth is expected to reach 206,000 as the unemployment rate should remain at 5%.

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

*All times are GMT.

Further reading:

• 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 USD/CAD (loonie), check out the  Canadian dollar
• For the Swiss Franc, see the  USD/CHF forecast.