Search ForexCrunch

The US dollar had another impressive week, making significant gains against many currencies. A rate decision in Japan, Ben Bernanke’s testimony, the FOMC Meeting Minutes, and the German Ifo Business Climate are the top events on our calendar. Here is an outlook on the main market movers awaiting us this week.

The dollar’s strength came despite weak US data: the Philly Fed Manufacturing Index dropped to -5.2 in May. The negative number joined lower inflation and a disappointing leap in jobless claims to 360K. While an improvement in jobless claims helped the dollar last week, the disappointment didn’t really hurt it. One of the reasons is that a dovish FOMC member became more hawkish, and talked about tapering down QE. The Australian dollar was severely hit across the board, and also the euro retreated, especially due to weak GDP numbers. Bernanke’s testimony is critical.  Let’s Start

  1. UK inflation data: Tuesday, 8:30. British consumer price inflation remained unchanged in March at 2.8%, its highest level since last May. However  economists believe weaker oil prices are expected to lower inflation in the coming months. CPI is expected to decline to 2.6%. The BOE foresees higher growth, lower inflation.
  2. Japanese rate decision: Wednesday. The Bank of Japan boosted its inflation and economic growth forecast on its last monetary policy meeting in April. BOJ board members estimated a 2.9% growth in the economy for the fiscal year to March saying there are some signs of picking up in Japan’s economy. The market expected a bit more at the time, and the stalled for a while. However, in the past week, the BOJ announced a fresh immediate plan to “calm bond markets”. The yen remains on the back foot.
  3. US Existing Home Sales; Wednesday, 14:00. Previously owned U.S. home sales declined unexpectedly in March to an annual rate of 4.92 million from 4.95 million in the previous month. Analysts expected a bigger gain of 5.02 million. The decline is probably related to the weak supply of properties; however, the building market is still expanding. A rise to 4.99 million is expected now. Recent housing figures have been mixed, with housing starts and building permits going in opposite directions.
  4. Ben Bernanke Testifies: Wednesday, 14:00. Federal Reserve Chairman Ben Bernanke will testify on the Economic Outlook and Monetary Policy before the Joint Economic Committee, in Washington DC. His testimony will follow a question and answer session where important information can be obtained. This event can cause market volatility. Markets will want to hear new hints about the QE program: fresh tapering or more QE?
  5. US FOMC Meeting Minutes: Wednesday, 18:00. The Fed made no policy changes in the last meeting held in May, but did offer some criticism to the government. They said that the levels of QE could rise or fall. The minutes could reveal the direction. Similar to Bernanke’s testimony, we can expect hints towards the next meeting.
  6. US Unemployment Claims: Thursday, 12:30. The number of Americans applying for unemployment benefits increased sharply last week rising 32,000 form the week before, reaching 360,000. The four-week moving average rose 1,250 to 339,250. Analysts expected a modest rise to 332,000. The unsteady employment data readings go hand in hand with the mixed government reporting that factory output fell sharply last month while retail sales unexpectedly rose. A drop to 347,000 is forecasted.
  7. US New Home Sales: Thursday, 14:00. Sales of new U.S. homes  improved in March with an annual addition of 417k following 411K in February, amid low mortgage rates, boosting the building sector. The market is buzzing with low inventories, rising prices and rising demand. A further rise to 429K is expected this time.
  8. Haruhiko Kuroda speaks: Friday, 2:55. BOE Governor Haruhiko Kuroda will speak in Tokyo. He may talk about the positive developments in Japan’s economy over the recent month and about the new monetary policy. His words can cause volatility in the markets. The government in Japan recently introduced new stimulus.
  9. Eurozone German Ifo Business Climate: Friday, 8:00. German  business  sentiment plunged for the second consecutive month in April, falling to 104.4 from 106.7 in March. The reading was much lower than the 106.4 predicted by analysts, indicating German economic recovery is not as strong as anticipated. The weakness in foreign trade weighs on the economy and domestic demand also fails to meet expectations. A small improvement to 104.6 is forecast.
  10. US Durable Goods Orders: Friday, 12:30. Orders for long-lasting U.S. manufactured goods declined by 5.7% in March following a 4.3% increase in February mainly due to a sharp drop in commercial aircraft demand and sluggish growth in orders. Excluding aircraft and transportation  orders the reading dropped 1.4%, down for the second consecutive month, after posting a 0.7% decline in February. The reading was worse than the 0.5% gain anticipated by analysts. Nevertheless the US economy is expected to grow 3.1% in the first quarter. A climb of 0.6% is forecast now.

*All times are GMT.

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

Further reading: