Forex Market Outlook For The Week April 27 – May 01, 2020

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The earnings season in the United States continues and technology companies like Alphabet, Microsoft, Amazon, Apple, and Facebook are set to report their January-quarter financial results and update on guidance for the full year amid the coronavirus pandemic. Meanwhile, the central banks in the Euro Area and the US are scheduled to hold policy meetings. GDP data and ISM manufacturing PMI are also due from the US next week. China will also report Manufacturing PMI. Australia is scheduled to report the inflation data. Having said that here is an outlook on a few important economic releases for the upcoming week:

#1: Japan BoJ Outlook Report (04/28/2020 Tuesday 03:00 GMT)

forex market outlookThe latest quarterly outlook report released on January 21, the Bank of Japan had said that the economy will in all probability continue to expand throughout fiscal 2021 as the impact of the domestic demand in overseas markets due to downturn is limited. However, the central bank said that the effects of the economic slowdown are likely to persist for now. Though exports are expected to remain weak, they are likely to show a moderately increasing trend as overseas economies register moderate growth. Domestic demand is also expected to show an uptrend. On a year-on-year basis, the consumer price index is expected to gradually increase towards 2.0 percent.

#2: Japan BoJ Monetary Policy Statement (04/28/2020 Tuesday 03:00 GMT)

The Bank of Japan releases the Monetary Policy Report eight times in a year. The central bank uses it as a tool to communicate with investors as regards the monetary policy. It provides the outcome of the members’ decisions on asset purchases and also offers commentary on the economic conditions that impacted their decision. More importantly, the report projects the nation’s economic outlook and provides clues on future decisions.

#3: United States CB Consumer Confidence (04/28/2020 Tuesday 14:00 GMT)

In the United States, the Consumer Confidence Index reported by the Conference Board dropped sharply in March after increasing in the previous month. In March, the Index stood at the 120.0 level, down from the 132.6 level in February. While the Present Situation Index declined to the 167.7 level from the 169.3 level, the Expectations Index declined to the 88.2 level from the 108.1 level.

Forecast for April 2020: 90.1

#4: Australia CPI (04/29/2020 Wednesday 01:30 GMT)

In Australia, the inflation rate increased 0.7 percent on a quarter-on-quarter basis in the last quarter of 2019 after recording a 0.5 percent gain in the prior period. The reading for the quarter came in above analysts’ expectations for a 0.6 percent gain. This was by far the highest inflation rate ever since the September quarter of 2016. The increase in inflation rate was driven by higher tobacco prices; domestic holiday, travel, and accommodation costs; automotive fuel prices; and fruit prices.

Forecast for the first quarter of 2020: 0.2 percent

#5: Australia Trimmed Mean CPI (04/29/2020 Wednesday 01:30 GMT)

In Australia, the trimmed-mean CPI increased 0.4 percent on a quarter-on-quarter basis in the December quarter of last year.

Forecast for the first quarter of 2020: 0.3 percent

#6: United States Advance GDP (04/29/2020 Wednesday 12:30 GMT)

The American economy expanded 2.1 percent in the fourth quarter of last year, the same amount as in the third quarter. The reading matched with the second estimate. The increase in personal consumption expenditures was offset by the downward revision to the nonresidential fixed investment and spending of the federal government. For the full year 2019, the economy grew 2.3 percent, the least ever since 2016, but missed the Trump administration’s 3.0 percent target for the second year.

Forecast for the first quarter of 2020: -3.9 percent

#7: United States FOMC Statement (04/29/2020 Wednesday 18:00 GMT)

Generally, the FOMC makes slight changes to the statement during each release. Traders focus on these changes. The FOMC uses the statement as a tool to communicate with investors as regards monetary policy. The statement contains the outcome of the members’ vote on setting interest rates and various other policy measures. It also contains a commentary on the economic conditions that impacted their decision. More importantly, it provides the nation’s economic outlook and clues on future decisions.

#8: United States FOMC Press Conference (04/29/2020 Wednesday 18:30 GMT)

Jerome Powell, Federal Reserve Chair, holds a press conference 30 minutes after the announcement of the Funds Rate. The press conference lasts for an hour and has two parts. In the first part, he reads out a prepared statement. In the second part, he answers questions posed by the representatives from the press. As the questions frequently lead to answers that are not scripted, heavy market volatility can be expected.

#9: China Manufacturing PMI (04/30/2020 Thursday 01:00 GMT)

In China, the Manufacturing PMI reported by the National Bureau of Statistics (NBS) jumped to the 52.0 level in March from the record low level of 35.7 recorded in the prior month. The reading for the month beat analysts’ expectations of 45.0 by a huge margin and pointed toward the strongest rate of expansion of the manufacturing sector ever since September 2017. This is because many companies started operations following the lockdown measures in February. However, the NBS noted that the reading for March may not signal the stabilization of economic activity in the country. Output, new orders, and employment rose in spite of a continued drop in exports. However, an increase in raw material inventories and longer supplier delivery times indicated that the manufacturing activity is still in contraction territory. Input prices declined for the very first time in as many as four months, while the deflation of the output charge deepened. Meanwhile, the business sentiment strengthened.

Forecast for April 2020: 51.0

#10: Euro Area ECB Main Refinancing Rate (04/30/2020 Thursday 11:45 GMT)

In the emergency meeting held on March 18, the European Central Bank policymakers agreed to implement decisive and bold action to counter the risks related to the rapid spreading of the coronavirus in respect of the monetary policy transmission mechanism, Eurozone economic outlook, and price stability objective of the ECB. Officials were concerned over the volatility of the financial markets, deterioration in the economic activity outlook, inflation, and a decline in the inflation expectations. The decision for launching the massive asset purchase program in March was made just six days following the ECB’s agreement on a slight increase in asset purchases and Christine Lagarde’s statement that it was not the job of the central bank to help “close spreads”. During the meeting on March 12, the ECB decided to hold the benchmark interest rate at the 0.0 percent level.

Forecast for April 2020: 0.00 percent

#11: Euro Area ECB Monetary Policy Statement (04/30/2020 Thursday 11:45 GMT)

At each release, the European Central Bank makes slight changes to the Monetary Policy Statement. Traders focus on these changes. The ECB uses this statement as a tool to communicate with investors as regards the monetary policy. It provides information about the outcome of members’ decisions on setting interest rates. In addition, it offers a commentary on the economic conditions that impacted their decision. More importantly, it discusses the nations’ economic outlook and provides clues on future decisions.

#12: Canada GDP (04/30/2020 Thursday 12:30 GMT)

Canada’s economy expanded 0.1 percent on a month-on-month basis in January, slowing down from the 0.3 percent expansion reported in December. The reading for the month matched with analysts’ expectations. The services-producing industries expanded 0.1 percent as the transportation and warehousing sector contracted for the second time in as many as three months. Further, output declined in retail trade; educational services; arts, entertainment, and recreation; and accommodation and food. Meanwhile, the goods-producing industries expanded 0.2 percent, after the stall in December, driven by the manufacturing sector as both durable as well as non-durable manufacturing improved.

Forecast for February 2020: 0.0 percent

#13: Euro Area ECB Press Conference (04/30/2020 Thursday 12:30 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. The press conference lasts for about an hour and has two parts. In the first part, they read out a prepared statement. In the second part, they answer questions posed by the press. As the questions frequently lead to answers that are not scripted, heavy market volatility can be expected.

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

In the United States, the number of people applying for unemployment benefits stood at 4.427 million at the end of last week. The total claims filed over the last five weeks added to more than 26 million, which is equivalent to 16 percent of the labor force. This indicated that the 22 million employment created as part of the employment boom starting from September 2010 has been completely wiped out in slightly more than a month due to the coronavirus pandemic. On a non-seasonally adjusted basis, the largest rises in jobless claims came in from California, Florida, Texas, New York, and Georgia. Further, an executive order has recently been signed by President Trump to suspend immigration into America for two months.

Forecast for the next week: 3,500,000

#15: United States ISM Manufacturing PMI (05/01/2020 Friday 14:00 GMT)

In the United States, the Manufacturing PMI reported by the Institute for Supply Management dropped to the 49.1 level in March from the 50.1 level in February. The reading for the month beat analysts’ expectations of 45.0. However, the reading pointed towards a contraction in factory activity due to the coronavirus pandemic and downturn in the energy markets around the globe. New orders, production, employment, inventories, and new export orders declined. Prices dropped faster and supplier deliveries decelerated. Further, the comments from the panel members were negative as regards the near-term outlook.

Forecast for April 2020: 36.7

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