Forex Market Outlook For The Week May 04 – 08, 2020

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After an eventful week, traders will be looking forward to the jobs report and the jobless claims from the United States. In April, the claims filed added up to more than 30 million. Further, interest rate announcements from the Bank of England and the Reserve Bank of Australia are due next week. The corporate earnings announcement will also continue with more than 1,300 companies set to announce their first-quarter results in the upcoming week. In the US, the non-farm payrolls are expected to fall by 21 million in April and the unemployment rate is likely to rise to its highest level ever since 1939 as the coronavirus pandemic wreaks havoc. Having said that here is an outlook on some of the key releases scheduled for the next week:

#1: Euro Area Economic Forecasts (05/05/2020 Monday)

The European releases the economic forecasts report on a quarterly basis. This report provides economic forecasts for the member states over the next two years, covering about 180 variables. Traders are interested because the forecasts provide insights into the basis of the evaluation of the economic performance of the European Commission and indicate trends in the member states with regard to the austerity measures and spending cuts that are being implemented.

#2: Australia Cash Rate (05/05/2020 Tuesday 04:30 GMT)

forex market outlookIn the meeting held in April, the Reserve Bank of Australia decided to leave the cash rate at the record low level of 0.25 percent as the nation grappled with the economic impact from the coronavirus outbreak. Policymakers also said that the cash rate target will not be increased until clear progress is made towards improving employment and having confidence that inflation can be sustained within the target range of 2.0 to 3.0 percent. Further, the Monetary Policy Committee members noted that there is an improvement in the performance of the bond market. However, they said that the quantum and frequency of purchase of government bonds will be reduced if there is further improvement in the conditions. Another aspect highlighted by the policymakers was that the economic uncertainty remained higher with a significant contraction anticipated in the second quarter and the jobless rate increased to the highest level in many years.

Forecast for May 2020: 0.25 percent

#3: Australia RBA Rate Statement (05/05/2020 Tuesday 04:30 GMT)

The Reserve Bank of Australia releases the Rate Statement on the first Tuesday of every month, except January. The central bank uses the statement as a tool for communicating with investors as regards the monetary policy. In addition to containing the outcome of the members’ decision on interest setting interest rates, the statement provides a 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.

#4: Germany Constitutional Court Ruling (05/05/2020 Tuesday)

In Germany, the Federal Constitutional Court in Karlsruhe is scheduled to announce its ruling on the constitutionality of the Asset Purchase Program of the European Central Bank.

#5: Canada Trade Balance (05/05/2020 Tuesday 12:30 GMT)

In Canada, the trade deficit narrowed down to C$0.983 billion in February after the deficit for the prior month was revised upward to C$1.66 billion. Analysts had expected the trade deficit to come in at C$1.87 billion. Exports increased because of higher sales transportation equipment including aircraft and parts; motor vehicles and spare parts; and non-energy items. A fall in the energy products moderated the overall increase in exports in February. Imports declined to a two-year low because of the fall in prices of energy products, mainly crude oil. The decline in imports was partially offset by an increase in the import of aircraft as well as other transportation equipment and spare parts. On the other hand, the nation’s trade surplus with the United States widened to C$3.7 billion from C$3.4 billion, as exports increased 2.5 percent, and imports rose at a slower pace of 1.7 percent. In the meantime, Canada’s trade gap with other countries narrowed to C$4.7 billion from C$5.0 billion in the previous month.

Forecast for March 2020: -C$2.2 billion

#6: United States ISM Non-Manufacturing PMI (05/05/2020 Tuesday 14:00 GMT)

In the United States, the non-manufacturing PMI reported by the ISM fell to the 52.5 level in March from the 57.3 level in the prior month. The reading for the month beat analysts’ expectations that the index will come in 44.0. However, March’s reading pointed towards the service sector’s weakest expansion ever since August 2016. Further, it also indicated the largest monthly decline in the headline index ever since September 1997 because of supply related problems caused by the coronavirus outbreak. Business activity, employment, inventories, and new export orders declined. However, new orders and supplier deliveries grew less. Prices remained nearly unchanged. Respondents were concerned about the impact of the coronavirus pandemic on the supply chain, human resources availability, operational capacity, and finances. They were also concerned about its ramifications on the nation’s overall economy, according to ISM Chair Anthony Nieves.

Forecast for April 2020: 37.5

#7: New Zealand Employment Change (05/05/2020 Tuesday 22:45 GMT)

In New Zealand, employment remained unchanged in the December quarter of last year.

Forecast for the first quarter of 2020: Employment is expected to contract by 02 percent

#8: New Zealand Unemployment Rate (05/05/2020 Tuesday 22:45 GMT)

In New Zealand, the unemployment rate dropped to the 4.0 percent level in the December quarter of last year from the 4.2 percent level in the prior period. The reading for the quarter came in below analysts’ expectations of the 4.2 percent level. The number of jobless people in the country dropped 3,000 to 111,000 as there were fewer unemployed women. The unemployment rate for women dropped to the 4.3 percent level from the 4.5 percent level in the prior quarter. However, unemployment among men remained steady at the 3.8 percent level. Meanwhile, the underutilization rate declined to the 10 percent level from the 10.4 percent level in the September quarter. This is the lowest underutilization rate ever since the June quarter of 2008. The labor force participation rate declined to the 70.1 percent level from the 70.4 percent level.

Forecast for the first quarter of 2020: 4.4 percent

#9: United States ADP Non-Farm Employment Change (05/06/2020 Wednesday 12:15 GMT)

In the United States, private businesses fired 27,000 workers in March after revising the hiring figures for the prior month downward to 179,000. The reading for March beat analysts’ expectations that 150,000 workers will be fired. The report includes data only till March 12 and does not fully reflect the impact caused by the coronavirus. This is the first decline in private payrolls ever since September 2017. While the service-providing sector shed 18,000 jobs in trade, utilities, transportation, and leisure and hospitality, the goods-producing sector fired 9,000 workers in the construction field. The manufacturing sector hired 6,000 workers and the mining and natural resources sector added 1,000 jobs.

Forecast for April 2020: The private sector is expected to shed 20,000,000 jobs

#10: Australia Trade Balance (05/07/2020 Thursday 01:30 GMT)

In Australia, trade surplus declined to A$4.36 billion in February after the surplus for the prior period was revised downward to A$4.75 billion. Analysts had expected the trade surplus to come in at A$3.65 billion. The surplus figure for February was the smallest ever since October 2019 and it reflected the impact of the coronavirus pandemic. Exports fell 5.0 percent on a month-over-month basis to the 17-month low of A$37.76 billion and imports declined 4.0 percent to the 25-month low of A$33.4 billion. For the first two months of this year, the trade surplus narrowed to A$9.11 billion from A$9.84 billion last year.

Forecast for March 2020: A$6.4 billion

#11: New Zealand Inflation Expectations (05/07/2020 Thursday 03:00 GMT)

In New Zealand, the two-year inflation expectations rose to the 1.9 percent level in the March quarter of this year from the 1.8 percent level in the prior three-month period.

#12: United Kingdom BoE Monetary Policy Report (05/07/2020 Thursday 11:00 GMT)

The Bank of England releases the Monetary Policy Report on a quarterly basis and provides the central bank’s inflation and economic growth projections over the next two years. These are the key factors that impact the future of monetary policy and interest rate decisions.

#13: United Kingdom BoE MPC Official Bank Rate Votes (05/07/2020 Thursday 11:00 GMT)

In the scheduled meeting held in March, the members of the Monetary Policy Committee unanimously voted (0-0-9) to hold the interest rate at the all-time low level of 0.1 percent.

Forecast for May 2020: 0-0-9

#14: United Kingdom BoE Monetary Policy Summary (05/07/2020 Thursday 11:00 GMT)

The Monetary Policy Summary Report released on a monthly basis by the Bank of England is a tool that the Monetary Policy Committee of the central bank uses for communicating with investors as regards policy decisions. It provides the outcome of the members’ vote on setting interest rates and other policy aspects. In addition, it provides a commentary on the economic conditions that impacted their votes. More importantly, it provides the nation’s economic outlook and indicates the direction of future votes.

#15: United Kingdom Official Bank Rate (05/07/2020 Thursday 11:00 GMT)

In the meeting of the Monetary Policy Committee members held in March, it was unanimously decided to hold the Official Bank Rate at the all-time low level of 0.1 percent. The policymakers took a wait-and-see approach, following the two emergency rate cuts in response to the financial and economic disruption caused by the spread of the coronavirus. The central bank also noted that the GDP of the United Kingdom was seen as falling sharply during the first six months of the year. As a result, unemployment is expected to significantly increase across the country. Further, policymakers vowed to take action, as required, for providing protection against an unwarranted tightening of the financial conditions and thus supporting the economy.

Forecast for May 2020: 0.10 percent

#16: United States Unemployment Claims (05/07/2020 Thursday 12:30 GMT)

The number of American people filing for jobless benefits during the week that ended on April 25 was 3.839 million compared to the 4.442 million claims reported during the prior week. Analysts had expected 3.5 million people to file jobless claims. With this, the total number of claims filed for jobless benefits since the start of the Covid-19 pandemic to more than 30 million. This suggested that layoffs have started spreading across industries that were not directly impacted by the pandemic. On a non-seasonally adjusted basis, Florida, California, Texas, New York, and Georgia reported the largest increases in initial jobless claims.

Forecast for the next week: 3,000,000

#17: Australia RBA Monetary Policy Statement (05/08/2020 Friday 12:30 GMT)

Released on a quarterly basis, the Monetary Policy Statement of the Reserve Bank of Australia provides valuable insights into the central bank’s view as regards inflation and economic conditions, the key factors that are taken into account to form the monetary policy and decide as to where the interest rates have to be set.

#18: Canada Employment Change (05/08/2020 Friday 12:30 GMT)

In Canada, as many as 1,010,700 people lost their jobs in March after 30,300 were hired in the previous month. Analysts had expected 350,000 job cuts in March. This is by far the biggest and record loss in employment and larger compared to the three recessions experienced by the country ever since 1980. The unprecedented job loss scenario was attributed to the lockdown implemented in view of the Covid-19 pandemic. While part-time work declined by 536,700 and full-time jobs dropped by 474,000. People in all provinces lost jobs, but it was more pronounced in Ontario, Quebec, British Columbia, and Alberta. As many as 392,500 youngsters lost their jobs, registering the fastest pace of decline across the three different age groups. Fewer people worked in industries where public-facing activities were involved or the scope for working from home was limited. This included accommodation and food services; information, culture, and recreation; educational services; and wholesale and retail trade.

Forecast for April 2020: 5,000,000

#19: Canada Unemployment Rate (05/08/2020 Friday 12:30 GMT)

In Canada, the unemployment rate rose to the 7.8 percent level in March from the 5.6 percent level in the prior month. The reading for the month came in above analysts’ expectations that the jobless rate would hit the 7.2 percent level. This was the highest unemployment rate ever since October 2010 and was caused by the pandemic. The labor force participation rate dropped down to the 63.5 percent level from the 65.5 percent level in the prior month. This is the lowest level ever since June 1979. Overall the youth unemployment rate rose to the 16.8 percent level from the 10.3 percent level in February, registering the highest unemployment rate ever since June 1997.

Forecast for April 2020: 20.0 percent

#20: United States Average Hourly Earnings (05/08/2020 Friday 12:30 GMT)

In the United States, the average hourly earnings of all the workers on private nonfarm payrolls rose by 0.4 percent on a month-on-month basis in March, following the 0.3 percent increase in February. This surprised the markets as the analysts had expected only a 0.2 percent increase. This was by far the highest increase in wages ever since November last year. On a year-on-year basis, the average hourly earnings increased by 3.1 percent, which was slightly above the 3.0 percent gain reported last month. Analysts had expected a 3.0 percent increase. The average hourly earnings of production and nonsupervisory workers in the private sector rose to US$ 24.07.

Forecast for April 2020: 0.3 percent

#21: United States Non-Farm Employment Change (05/08/2020 Friday 12:30 GMT)

In the United States, non-farm payrolls decreased by 713,000 in March.

Forecast for April 2020: Employment in America is expected to decline by 21,000,000

#22: United States Unemployment Rate (05/08/2020 Friday 12:30 GMT)

In the United States, the unemployment rate rose to the 4.4 percent level in March, the highest ever since August 2017. The jobless rate for the month came in well above analysts’ expectations that unemployment would reach the 3.8 percent level as millions lost jobs because of the Covid-19 crisis. The number of unemployed people in the country increased by 1.35 million to 7.14 million and the number of employed people declined by 2.99 million to 155.77 million. The jobless numbers are expected to worsen in April as the surveys showed that a majority of the people were suffering because of the lockdown.

Forecast for April 2020: 16.0 percent

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