Forex Weekly Outlook May 6-10 – US inflation, UK GDP, and two rate decisions

Markets rocked with the Fed, the BOE, and Non-Farm Payrolls in a robust kick-off to the month of May. The action continues in the upcoming week with US inflation, UK GDP, and two rate decisions in the South Pacific among other events. Here the highlights for the next week.

 

1. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia has not changed its interest rates since August 2016, but this time may be different. The Canberra-based institution may finally oversee a cut from 1.50% to 1.25% after Q1 inflation came out flat. In addition, the global economy is slowing down and the housing sector is somewhat struggling in the land down under. On the other hand, the labor market is doing well and so is the economy. Not all analysts see a rate cut coming now. The uncertainty implies a substantial AUD/USD reaction to the news
2. New Zealand rate decision: Wednesday, 2:00. The Reserve Bank of New Zealand last changed the interest rate in November 2016, similar to its neighbor. And also here, disappointing data on several fronts may trigger a rate cut this time. The RBNZ may cut interest rates as well, not only low inflation but also on issues in the labor market. Governor Adrain Orr will hold a press conference at 3:00 GMT.
3. ECB Meeting Minutes: Wednesday, 11:30. The European Central Banks left its policy unchanged in April as expected. President Mario Draghi repeated the stance that “risks are moving to the downside” but tried to balance things out by mentioning the upbeat points alongside the concerns. Four weeks have passed since that decision and now we will get to learn about the internal deliberations within the Frankfurt-based institution. The document usually reiterates the same points made in the statement, but this time the tone may be redacted to be more positive after the euro-zone GDP growth rose to 0.4% QoQ. Markets would like to assess when the next rate change is coming.
4. UK GDP: Friday, 8:30. Britain releases GDP data on a frequent, monthly basis. However, this time it releases the data for March, thus the full data for the past quarter. The economy grew at a meager pace of 0.2% in Q4 and signs of a slowdown have been seen in Q1. Despite signs of recovery in other places, the ongoing Brexit uncertainty probably left the British economy behind. A better figure is likely now.
5. US inflation: Friday, 12:30. US inflation is slowing down, as seen in both the Core CPI that dropped to 2% y/y and in the Fed’s preferred gauge, the Core PCE, which slipped to 1.6%. The focus in April’s report remains on the yearly core number. A drop below 1.9% will further limit any chances for a rate hike this year.
6. Canadian jobs data: Friday, 12:30. Canada’s winning streak of jobs reports came to a halt in March with a loss of 7.2K positions. The unemployment rate stood at 5.8%. A rise is likely now. The Canadian dollar is very sensitive to the data and past experience shows that the moves are slow, allowing retail traders to jump in.

*All times are GMT

Follow us on Sticher or iTunes

Further reading:

• EUR/USD forecast – for everything related to the euro.
• GBP/USD forecast – Pound/dollar analysis
• USD/JPY forecast – the outlook for dollar/yen
• AUD/USD forecast – projections for the Aussie dollar.
• USD/CAD forecast – Canadian dollar predictions

Safe trading!