Forex Market Outlook For The Week April 20 – 24, 2020

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The coronavirus is likely to continue its domination of the headlines along with the first-quarter earnings reports. As many as 500 US companies are expected to report their results and update guidance on annual expectations. On the economic front, flash PMI survey reports are scheduled to be released by the US, UK, and EU countries. Other important releases include retail trade from the UK and the German Ifo Business Climate Index. Having said that here is an outlook on some of the key releases scheduled for the upcoming week:

#1: Australia RBA Gov Lowe Speaks (04/21/2020 Tuesday 05:00 GMT)

Philip Lowe, Governor of the Reserve Bank of Australia, is scheduled to deliver a speech on the topic “Economic and Financial Update” at the Reserve Bank of Australia, Sydney. As the governor is expected to answer questions from the audience, markets are likely to remain volatile during the session. Traders look forward to understanding the direction of interest rates in the future.

#2: France Flash Services PMI (04/23/2020 Thursday 07:15 GMT)

In France, the Service PMI reported by IHS Markit was revised downward to the 27.4 level in March from the preliminary reading of 29.0. In February, the Index came in at the 52.5 level. The reading for March pointed towards the fastest activity downturn since the beginning of the series in May 1998. Exports and new orders declined the most as per record as demand fell sharply amid restrictions to arrest the spread of the novel coronavirus. Among the sectors that were affected, the sharpest fall was seen in Restaurants and Hotels. The rate of contraction of the workforce was most pronounced ever since January 2013. Input costs more or less stabilized as a reduction in staff costs offset an increase in raw material prices. This prompted firms to reduce output charges so as to boost sales. Business sentiment hit the lowest level on record amid fears of prolonged disruption due to coronavirus pandemic.

Forecast for April 2020: 25.1

#3: Germany Flash Manufacturing PMI (04/23/2020 Thursday 07:30 GMT)

forex market outlookIn Germany, the Manufacturing PMI reported by IHS Markit/BME was revised downward to the 45.4 level in March from the preliminary estimate of 45.7 and the reading pointed towards contraction for 15th month in a row in factory activity amid the fast progression of the COVID-19 disease. New orders and output fell the most ever since April 2009 driven by the growing weakness in overseas demand and an increase in the supply-chain disruption. The employment capacity was scaled down. Some relief on the supply front prevented a further decline in input costs though demand for raw materials declined and the oil prices slumped. The drop in output prices accelerated to the fastest level ever since September 2009. Business confidence registered a record decline, slumping to the lowest level in as many as eight years.

Forecast for April 2020: 39.0

#4: Germany Flash Services PMI (04/23/2020 Thursday 07:30 GMT)

In Germany, the Services PMI reported by IHS Markit was revised downward to the 31.7 level in March from the preliminary reading of 34.5 and last month’s level of 52.5. The latest reading pointed towards a record services sector contraction because of the collapse in demand due to the spreading of the coronavirus and the efforts to contain the same. A notable decline in activity was seen across the services sector. The sharpest decline was seen in the Hotels and Restaurants sector. New business, activity, and employment declined sharply and the prices charged fell for the first time in over five years. Business confidence plummeted to a record low level amid the escalation of the coronavirus outbreak.

Forecast for April 2020: 29.0

#5: United Kingdom Flash Manufacturing PMI (04/23/2020 Thursday 08:30 GMT)

In the United Kingdom, the Manufacturing PMI reported by IHS Markit/CIPS was revised downward to the 47.8 level in March from the initial estimate of 48.0. Further, the reading for the month was down from the final reading of 51.7 for February. Manufacturing contracted the most ever since July 2012. New orders fell sharply as the coronavirus outbreak led to a drop in domestic and overseas demand. Additionally, employment declined the most ever since July 2009. Firms cited redundancies, restructuring of the workforce, natural wastage, and replacement of essential positions. Vendor delivery times were the longest in the 28-year history of the survey amid reports of shortages in input, transport disruption, and delays in the receipt of goods from overseas markets. Input costs, as well as output charges, increased modestly. Business confidence hit a record low level.

Forecast for April 2020: 42.5

#6: United Kingdom Flash Services PMI (04/23/2020 Thursday 08:30 GMT)

In the United Kingdom, the Services PMI reported by IHS Markit/CIPS was revised downward to the 34.5 level in March 2020 from the initial estimate of 35.7, signaling the sharpest downturn in activities in the service sector ever since the start of survey series in July 1996. While new orders fell at a record rate amid the coronavirus pandemic, new overseas business declined even more because of international travel restrictions as well as widespread closure of businesses across Europe. Employment fell the most ever since June 2009 following hiring freezes and redundancies amid a slump in business activities. Prices charged by companies in the service sector fell at the fastest rate ever since August 2009. Business confidence declined to an all-time low level because of the public health concern and uncertainty related to the duration of disruption to business activities.

Forecast for April 2020: 29.6

#7: United States Unemployment Claims (04/23/2020 Thursday 12:30 GMT)

The number of people in America filing for jobless benefits came in at 5.245 million during the week that ended on April 11, down from 6.615 million reported for the previous week. Analysts had expected 5.105 million Americans to file for unemployment benefits. With this, the total number of jobless claims over the past month rose to 22 million amid the spread of coronavirus pandemic across the United States. The four-week moving average, which eliminates the week-to-week volatility, rose to an all-time high level of 5.509 million. Meanwhile, the continuing unemployment claims hit a record level of 11.976 million during the week that ended on April 4.

#8: United States Flash Manufacturing PMI (04/23/2020 Thursday 13:45 GMT)

In the United States, the Manufacturing PMI reported by IHS Markit was revised downward to the 48.5 level in March from the preliminary reading of 49.2. In February, the index stood at the 50.7 level. The latest reading pointed towards a contraction in the manufacturing activities ever since August 2009 amid weakness in domestic and overseas demand, following the coronavirus outbreak. Output contracted sharply and at the fastest rate in more than a decade because of the closing down of factories and fall in client demand. New orders declined because of a slump in demand due to the COVID-19 outbreak. Firms also registered a solid decline in new export orders. Meanwhile, manufacturers retrenched employees at the fastest rate ever since October 2009. There was only a marginal increase in input prices. Fears surrounding the duration of shutdowns and speed of economic recovery thereafter pulled business confidence down to the lowest level ever since the data collection for the series started in July 2012.

#9: United Kingdom Retail Sales (04/24/2020 Friday 06:00 GMT)

In the United Kingdom, retail trade declined by 0.3 percent on a month-on-month basis in February after the figure for the prior month was revised upward to a gain of 1.1 percent. The reading for the month missed analysts’ expectations for a 0.2 percent increase. Many retailers provided adverse feedback on the effect of extreme rainfall on retail sales. The largest contribution to the decline in retail trade came from the non-store retailing sector. This was followed by food trade and department stores. Meanwhile, sales at fuel stores; household goods stores; and textile, clothing, and footwear stores registered an increase. On a year-on-year basis, retail trade remained flat in February. This was the weakest annual retail sales ever since March 2013.

#10: Germany Ifo Business Climate (04/24/2020 Friday 08:00 GMT)

In Germany, the Ifo Business Climate Index reading was revised downward to the 86.1 level in March, the lowest reading ever since July 2009, from the preliminary reading of 87.7. March’s reading represented the steepest monthly decline ever since German reunification. The COVID-19 outbreak hurt businesses, employment, and overall activity. Business sentiment across service providers registered the largest decline on record and the same among traders fell sharply. Additionally, the manufacturing confidence fell to the lowest level ever since August 2009. The morale among constructors also declined. According to the Ifo Institute, Germany’s economy might contract by as much as 5 percent to 20 percent in 2020, depending on the duration of the lockdown due to the pandemic.

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