Forex Weekly Outlook May 9-13

The US dollar had an impressive Turnaround Tuesday and its strength was seen hence forward. A rate decision in the UK, GDP from German and a focus on the US consumer stand out.  These are the main events on Forex calendar. Here is an outlook on the market movers for this week.

The U.S. monthly employment report showed a lower than expected job gain of 160,000 in April but the solid rise in wages, at 2.5%, was where the focus of markets was eventually. While a rate hike in June remains a remote option for the Fed, the data was good enough to support the US dollar, which has finally begun receiving some love after falling to the abyss early in the week. Elsewhere, the Australian dollar was hit hard by the RBA, the loonie drifted lower on a mix of weak data and relaxed oil prices, the euro dropped after reaching new highs amid chances of a fresh Greek crisis and the yen cooled down.  Let’s start,

1. Chinese trade balance: Sunday, when markets are closed. The  world’s second largest economy is a  cause of worry for the Fed and for markets in general. The level of activity in China will impact the opening. The figures are for the month of April, far enough from the Chinese New Year in February, a reason for seeing skewed numbers. A yuan surplus of 250 billion is expected after 195 billion last time.
2. RBNZ financial stability report:  Monday, 21:00, with follow up appearances by  RBNZ Governor Graeme Wheeler. He  may elaborate on the economic factors which prompted the last cash rate decision towards the end of April. Investors are confused as to the RBNZ’s policy. The strong New Zealand dollar opposes the boost in the housing market and the bank’s struggle with low inflation continues. Analysts find it hard to interpret Wheeler’s decisions as the recent rate cut in March. After the RBA cut rates, the RBNZ may be next in line and perhaps also CAD. This event could have an impact beyond the shores of New Zealand.
3. US Crude Oil Inventories: Wednesday, 14:30. U.S. crude inventories climbed to fresh record highs last week rising by 2.8 million barrels. The reading was considerably higher than the 0.6 million barrels forecast by analysts.   The increase pushed oil markets lower. Brent crude declined more than 5 since Friday’s high due to rising output from the Organization of the Petroleum Exporting Countries, signs of economic slowdown in the United States and Asia, and a stronger dollar. Some investors believe this trend will continue in 2016 while others expect improvement.
4. UK Rate decision and inflation report: Thursday, 11:00 with Governor Mark Carney speaking at 11:45. The Bank of England decided to keep rates unchanged at its April meeting aiming to reach the 2% inflation target and maintain growth and employment.   The MPC members voted unanimously to hold Bank rate at 0.5%,  leaving asset purchase at £375 billion. Policymakers noted the risks in low energy and food prices, expecting it to fade over the next year.   Despite the rise in core inflation it remained subdued along with weak global inflation and restrained domestic cost growth. The MPC members forecast the Bank rate will rise to ensure inflation returns to the target in a sustainable fashion.  However, the EU referendum effects may spoil forecasts. With this “Super Thursday” release of both the regular rate decision and its minutes as well as the quarterly inflation report, the BOE could weigh into the Brexit debate which has now become a global issue.
5. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits increased more than expected last week, as claims registered the biggest gain in more than a year. Furthermore, the energy sectors increased the number of layoffs due to low oil prices. The number of claims has increased by 17,000 to a seasonally adjusted 274,000. Analysts believe the rise is technical. The four-week moving average of claims increased 2,000 to 258,000 last week. The number of claims is expected to reach 277,000 this week.
6. German GDP data: Friday, 6:00. German economy continued to grow at a steady but modest pace of 0.3% in the final quarter of 2015. The economic expansion was mainly due to strong domestic consumption. The reading was in line with market forecast.  Exports declined from the third quarter affected by the weak demand from China, Russia and other large developing economies. Meanwhile, domestic consumption maintained German economy’s growth at the end of last year. Economic growth is expected to reach 0.6% in the first quarter of 2016.
7.  US retail sales: Friday, 12:30. U.S. retail sales unexpectedly declined in March, down  0.3% following a 0.1% drop in February. Economists expected the index to rise 0.1%. However despite the soft start to the year, analysts believe that if the current job gains continue, they will boost consumer spending in the long run. Meanwhile core sales excluding automobiles increased 0.2% while anticipated to climb 0.4%.  Retail sales is forecasted to decline 0.3%, while core sales are expected to gain 0.6%.
8. US PPI: Friday, 12:30. US producer prices were weaker than expected in March declining 0.1% while expected to gain 0.3%. Lacks of inflationary pressures together with weak pricing power were behind this fall. Meanwhile core prices were unchanged compared to the expected 0.1% increase. On an annual basis, prices declined 0.1% with a core 0.9% increase. The Fed is quite confident about the pace of growth in the   US employment market but is concerned over weakening inflation expectations which is a key barrier to further rate increases. Producer prices are expected to rise 0.3% this time.
9. US Consumer Sentiment: Friday, 14:00. Consumer confidence declined for the fourth straight month in April registered 89.7 from 91 posted in March amid growing concerns about weaker economic growth. Analysts expected a positive reading of 91.9. These soft figures raise concerns over the resilience of consumers in the coming months. Economists fear the slowdown may affect wage gains and slowing economic growth would reduce the pace of job creation. Consumer confidence is estimated to rise to 89.9 this time.

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

*All times are GMT.

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