Forex Market Outlook for the Week April 19 – 23, 2021

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The first-quarter earnings season continues in the upcoming week, with major companies like IBM, Netflix, Intel, P&G, and Johnson & Johnson set to report their results. On the economic front, flash PMI surveys from France and Germany will be on focus. The central banks in the Euro Area and Canada are set to announce their monetary policy. Other important data to be announced include retail sales data from the UK and Australia. Having said that here is an outlook on a few key releases for the next week:

#1: New Zealand CPI (04/20/2021 Tuesday 23:45 GMT)

In New Zealand, consumer prices increased 0.50 percent on a quarter-on-quarter basis in the final quarter of last year.

Forecast for the first quarter of 2021: 0.8 percent

#2: Australia Retail Sales (04/21/2021 Wednesday 02:30 GMT)

forex market outlookIn Australia, retail sales declined 0.8 percent on a month-over-month basis in February, down from the preliminary estimate that showed a 1.1 percent decline. The final reading for the prior month was a 0.3 percent gain. Consumption continued to weaken amid COVID-19 restrictions. Sales declined for both food retailers and other retailers. However, sales increased for household goods retailers; clothing, footwear, and personal accessory retailers; department stores; and cafes, restaurants, and takeaway food stores. Across states and territories, sales dropped in Victoria, Western Australia, Northern Territory, and Tasmania.

Forecast for March 2021: 1.0 percent

#3: United Kingdom BoE Governor Andrew Bailey Speaks (04/21/2021 Wednesday 11:30 GMT)

Andrew Bailey, Governor of Bank of England, is scheduled to speak on the topic “diversity in market intelligence” at a virtual event organized by the Bank of England. Markets often turn volatile during his speeches as traders make an attempt to understand the direction of interest rates.

#4: Canada BoC Monetary Policy Report (04/21/2021 Wednesday 15:00 GMT)

The Bank of Canada releases the Monetary Policy Report on a quarterly basis. The report provides valuable insights into the central bank’s view of the nation’s economic situation as well as inflation.

#5: Canada BoC Rate Statement (04/21/2021 Wednesday 15:00 GMT)

The Bank of Canada releases the Rate Statement eight times a year. The central uses it as a tool to communicate with investors as regards the monetary policy. In addition to containing the outcome of the members’ decision on setting interest rates, it also offers commentary on the economic conditions that impacted their decision. More importantly, it projects the nation’s economic outlook and offers clues on future decisions.

#6: Canada Overnight Rate (04/21/2021 Wednesday 15:00 GMT)

In the Monetary Policy Committee meeting held in March, the Bank of Canada decided to leave the key overnight rate steady at 0.25 percent which was in line with analysts’ expectations. Further, the central bank maintained its extraordinary forward guidance, which was reinforced as well as supplemented by the quantitative easing program. The program is being continued at the current pace of a minimum of C$4 billion per week. Policymakers also said that in spite of the stronger near-term outlook, the economic slack is considerably high and there is a lot of uncertainty as regards the evolution of the virus and economic growth. The central bank expects Canada’s GDP will growth will remain positive in the first quarter of this year against the contraction predicted in January. Inflation is expected to hover around at the top of the 1 to 3 percent target band during the next few months. Inflation is expected to moderate after that.

Forecast for April 2021: 0.25 percent

#7: Canada BoC Press Conference (04/21/2021 Wednesday 16:00 GMT)

The Governor of the Bank of Canada often holds a press conference 75 minutes the announcement of the interest rate to discuss the contents of the report. There are two parts to the press conference. In the first part, he reads a prepared statement. In the second, he answers questions posed by the press representatives. As the questions can lead to unscripted answers, heavy market volatility can be expected.

#8: Euro Area ECB Monetary Policy Statement (04/22/2021 Thursday 12:45 GMT)

The European Central Bank releases the Monetary Policy Statement eight times a year. At each release, the ECB incorporates minor changes. Traders focus on these changes to understand the direction of interest rates. The central bank uses the statement as a tool for communicating with investors as regards the monetary policy. In addition to providing the outcome of the members’ decision on setting interest rates, it offers commentary on the economic conditions that impacted their decision. More importantly, the statement discusses the nation’s economic outlook and provides clues on future decisions.

#9: Euro Area ECB Main Refinancing Rate (04/22/2021 Thursday 12:45 GMT)

In the meeting held in March, the policymakers of the European Central Bank discussed an increase in bond buying under the PEPP and also agreed that it is not necessary to use the envelope in full provided favorable financing conditions can be maintained. Further, officials said that the increase in nominal yields indicated the markets’ reassessment of the inflation outlook. Higher real rates may not be a matter of concern and trigger a policy intervention if they pointed towards higher growth prospects instead of a higher real term premium. The ECB had said last month that it would do emergency bond purchases, that too at a higher pace over the period April to June with an aim to bring down government bond yields and support the economic recovery of the Eurozone.

Forecast for April 2021: 0.00 percent

#10: Euro Area ECB Press Conference (04/22/2021 Thursday 13:30 GMT)

The President and Vice President of the European Central Bank hold a press conference 45 minutes after the announcement of the Minimum Bid Rate. There are two parts to the press conference: reading a prepared statement and answering questions posed by the press representatives. As the questions can lead to unscripted answers, heavy market volatility can be expected.

#11: United Kingdom Retail Sales (04/23/2021 Friday 07:00 GMT)

In the United Kingdom, retail trade jumped 2.1 percent on a month-over-month basis in February 2021, following the 8.2 percent fall in January. The reading for the month was in line with analysts’ expectations. The largest contribution came in from non-food stores, led by household goods and department stores amid increased spending on outdoor furniture and home improvement goods ahead of the relaxation of restrictions imposed to contain the spread of the coronavirus. However, sales declined at textile, footwear, and clothing stores and auto fuel outlets. Online spending jumped to 36.1 percent, the highest on record.

Forecast for March 2021: 1.5 percent

#12: France Flash Services PMI (04/23/2021 Friday 08:15 GMT)

In France, the Services PMI reported by IHS Markit was revised upward to the 48.2 level in March from the preliminary reading of 47.8. In the prior month, the index came in at the 45.6 level. The reading for the month pointed to the slowest monthly contraction in the activity in the services sector so far this year. However, the index extended the current declining trend to the seventh month. New business, as well as business activity, declined at a slower rate, while employment increased faster. Among sectors, the weakest performers were hotels and restaurants because of a slight decline in demand. Input costs and output charges rose as global supply chain-related issues caused a raw material shortage. Business sentiment, however, remained at the strongest level in 2.5 years, driven by the expectation for a rebound in economic activity.

Forecast for April 2021: 46.6

#13: Germany Flash Manufacturing PMI (04/23/2021 Friday 08:30 GMT)

In Germany, the Manufacturing PMI reported by IHS Markit/BME came in at 66.6 (unrevised) in March 2021, up from the 60.7 level in February. The reading for the month pointed to a record increase in factory activity amid record growth in output and new orders. Increasing capacity pressures and strong confidence as regards the outlook led to a rise in employment in the sector in over two years. However, the survey showed deterioration in supply conditions because of input delivery delays. This pushed cost inflation to the highest levels in more than a decade. Manufacturers’ expectations as regards activity during the coming year continued to remain strongly positive. However, some firms were uncertain whether the current demand levels could be sustained.

Forecast for April 2021: 65.8

#14: German Flash Services PMI (04/23/2021 Friday 08:30 GMT)

In Germany, the Services PMI reported by IHS Markit was revised upward to the 51.5 level in March from the preliminary reading of 50.8. The reading for the month pointed towards an increase in activity in the services sector in as many as six months, following the relaxation of lockdown measures and recovery in confidence among clients. However, the underlying demand remained muted though there were signs of stabilization towards the end of the March quarter. New work inflows declined at the slowest pace in the current six-month contraction sequence. The lack of new business coming in from overseas dragged the overall demand down. The pandemic continued to disrupt international sales. The job creation pace increased slightly, though it continued to remain modest. Meanwhile, firms’ activity expectations touched the highest level in as many as three years amid hopes that the progress made in vaccine rollout would enable restrictions to be further lifted in the near future.

Forecast for April 2021: 51.1

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