Forex Market Outlook For The Week May 11 – 15, 2020

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Investors are likely to continue to focus on the impact of COVID-19 on economies around the world. The US is scheduled to reveal the retail trade and inflation data. The UK and Germany are expected to announce first-quarter GDP figures. Employment figures from Australia and interest rate announcement by the Reserve Bank of New Zealand are also due next week. Having said that here is an outlook on some of the key releases scheduled for the upcoming week.

#1: New Zealand ANZ Business Confidence (05/11/2020 Monday 01:00 GMT)

In New Zealand, the ANZ Business Confidence Index declined to the -66.6 level in April, its lowest level ever since April 1988, from the -63.5 level recorded in the prior month. More businesses halted production as the country was put under level 4 lockdown. The activity outlook and export expectations indexes touched fresh record lows, while those related to employment intentions, investment, and capacity utilization tumbled. The pricing intentions index turned negative as cost pressures reduced and inflation expectations slowed down a little bit. Among sectors, residential construction and commercial building continued to remain in the negative territory.

#2: United States CPI (05/12/2020 Tuesday 12:30 GMT)

forex market outlookIn the United States, consumer prices fell 0.4 percent on a month-over-month basis in March after registering a 0.1 percent increase in February. The reading for the month came in below analysts’ expectations for a 0.3 percent decline. This is by far the largest monthly decline ever since January 2015 and is attributed mainly to a 10.5 percent fall in gasoline prices. Decreases in airline fares, away from home lodging tariffs, and apparel costs also contributed to the decline. On the other hand, prices of food, used cars and trucks, medical care, insurance, and motor vehicle insurance increased.

Forecast for April 2020: -0.7 percent

#3: United States Core CPI (05/12/2020 Tuesday 12:30 GMT)

Core consumer prices, which exclude food and energy, fell 0.1 percent. The core inflation rate fell for the first time since January 2010.

Forecast for April 2020: -0.2 percent

#4: New Zealand RBNZ Official Cash Rate (05/13/2020 Wednesday 02:00 GMT)

In the emergency meeting held in March, the Reserve Bank of New Zealand decided to cut the Official Cash Rate by as much as 75 basis points to the record low level of 0.25 percent. This was in line with the rate cuts announced by other countries around the world. According to policymakers, the borrowing costs are likely to remain at this level for the next twelve months at the least because of the negative economic impact caused by the coronavirus pandemic. The Monetary Policy Committee also noted that if there is a requirement for providing further stimulus at some point in time, an asset purchase program of the government of New Zealand’s bonds would be launched rather than effecting more OCR cuts. They also opined that government spending and investment will continue to remain subdued for more time due to the significant negative impact caused by the coronavirus pandemic on the country’s economy.

Forecast for May 2020: 0.25 percent

#5: New Zealand RBNZ Monetary Policy Statement (05/13/2020 Wednesday 02:00 GMT)

The Reserve Bank of New Zealand releases the Monetary Policy Statement on a quarterly basis as the central bank is mandated to provide details as to how the target inflation rate will be achieved, how the monetary policy will be formulated and implemented during the next five-year period, and how the monetary policy was implemented since the release of the last statement. The Statement provides valuable insights into the central bank’s view of inflation and economic conditions. These are the key factors that shape the monetary policy and impact the interest rate decisions.

#6: New Zealand RBNZ Rate Statement (05/13/2020 Wednesday 02:00 GMT)

The Reserve Bank of New Zealand releases the Rate Statement seven times every year. The Central Bank uses it as a tool for communicating with investors as regards the monetary policy. It provides the outcome of the members’ decision on where to set the interest rates and commentary on the economic conditions that impacted their decision. More importantly, it provides the nation’s economic outlook and also offers clues on future decisions.

#7: New Zealand RBNZ Press Conference (05/13/2020 Wednesday 03:00 GMT)

The Governor of the Reserve Bank of New Zealand holds a press conference on a quarterly basis after the announcement of the Official Cash Rate. The press conference lasts for about 30 minutes and has two parts. In the first part, the Governor reads out a prepared statement. In the second, the Governor answers questions posed by the press representatives. As the questions often lead to answers that are not scripted, heavy market volatility can be expected.

#8: United Kingdom Preliminary GDP (05/13/2020 Wednesday 06:00 GMT)

The gross domestic product of the United Kingdom remained flat in the December quarter of last year, the same as the preliminary estimate. In the third quarter of 2019, the British economy registered a growth of 0.5 percent. Household consumption remained unchanged in the final quarter of 2019, recording the first quarter of flat growth rate ever since the final quarter of 2015. The formation of the gross fixed capital declined the most in as many as two years, driven by a significant contraction in business investment. On the other hand, government consumption rebounded strongly, driven by health and education. Net trade made positive contributions to the GDP because exports increased more than imports. Services activity expanded at a slower rate, while production output declined because of a decline in manufacturing, mining, and quarrying activities. Additionally, construction output moved into contraction territory.

Forecast for the first quarter of 2020: -2.5 percent

#9: United States Fed Chair Jerome Powell Speaks (05/13/2020 Wednesday 13:00 GMT)

Jerome Powell, Federal Reserve Chair, is scheduled to speak on the current economic issues at a webinar organized by the Peterson Institute for International Economics. Questions from the audience are expected. Markets often turn volatile during his speeches. This is because traders make an attempt to digest the interest rate clues.

#10: Australia Employment Change (05/14/2020 Thursday 01:30 GMT)

In March, Australia added 5,900 jobs after the previous month’s figure was revised downward to hiring 25,600 workers. The data for March beat analysts’ expectations for a loss of 40,000 jobs. Part-time employment rose by 6,400. However, full-time employment dropped by 400.

Forecast for April 2020: Australia is expected to lose 550,000 jobs

#11: Australia Unemployment Rate (05/14/2020 Thursday 01:30 GMT)

On a seasonally adjusted basis, Australia’s unemployment rate rose to the 5.2 percent level in March from the 5.1 level in February. The reading for the month came in below analysts’ expectations of 5.5 percent. The Australian Bureau of Statistics noted that the unemployment rate did not show the full impact of the pandemic as the period covered related to the first half of the month, the period before the implementation of the lockdown measures. While the number of people looking for full-time jobs increased to 505,500, those looking for part-time work declined to 213,100. The number of unemployed people in Australia rose to 718,600. The participation rate remained unchanged at the 66 percent level. However, the reading came in above analysts’ expectations of 65.9 percent. The underemployment rate rose by 0.1 points to the 8.7 percent level and the underutilization rate edged up by 0.1 points to the 13.9 percent level.

Forecast for April 2020: The unemployment rate is expected to come in at 8.3 percent

#12: New Zealand Annual Budget Release (05/14/2020 Thursday 02:00 GMT)

Released annually, the budget document outlines the details related to the government’s expected income and spending, borrowings, planned investments, and financial objectives. Domestic borrowing and spending levels significantly impact the economic status of the country. Increased spending contributes to the generation of work for contractors and job creation. On the other hand, borrowing levels potentially impact the nation’s credit rating and provide valuable insights into the underlying fiscal position.

#13: United Kingdom BoE Governor Andrew Bailey Speaks (05/14/2020 Thursday 10:30 GMT)

Andrew Bailey, Governor of the Bank of England, is scheduled to participate in a webinar. Markets often turn volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates.

#14: United States Unemployment Claims (05/14/2020 Thursday 12:30 GMT)

In America, the number of people filing for jobless benefits came in at 3,169,000 during the week that ended on May 2, 2020. The number of filings for the prior period was revised to 3,846,000. Analysts had expected 3,000,000 people to apply for unemployment benefits. With this, the total number of Americans filing for jobless benefits since the beginning of the coronavirus crisis has risen to 33.5 million, representing 22 percent of the people in the working age group. On a non-seasonally adjusted basis, the highest increases in unemployment claims were reported by California, Texas, New York, and Georgia. The four-week moving average, which eliminates week-to-week volatility, eased for the second consecutive week to 4.174 million. Continuing unemployment claims touched a new record of 22.647 million during the week that ended on April 25, 2020.

#15: Canada BoC Governor Stephen Poloz Speaks (05/14/2020 Thursday 15:15 GMT)

Stephen Poloz, Governor of the Bank of Canada, is scheduled to hold a press conference in Ottawa on the Financial System Review. Markets often turn volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates.

#16: Euro Area Germany Preliminary GDP (05/15/2020 Friday 06:00 GMT)

In the final quarter of 2019, Germany’s economy did not show any growth after registering a 0.2 percent expansion in the prior quarter. Household consumption stagnated and the contribution from net trade negative as a result of a 0.2 percent drop in exports and a 1.3 percent increase in imports. Government spending rose slightly and fixed investment in construction improved 0.6 percent partly because of the mild weather. Investment in equipment and machinery fell.

Forecast for the first quarter of 2020: -2.3 percent

#17: United States Core Retail Sales (05/15/2020 Friday 12:30 GMT)

In the United States, core retail sales, which exclude autos, fell 4.2 percent on a month-over-month basis in March, improving slightly from the preliminary estimate of a 4.5 percent decline. This is by far the largest drop in core retail sales on record. Many businesses had to shut down operations in the wake of the spreading of the coronavirus.

Forecast for April 2020: -8.0 percent

#18: United States Retail Sales (05/15/2020 Friday 12:30 GMT)

In the United States, retail trade plunged 8.4 percent on a month-on-month basis in March, improving slightly from the preliminary estimate of 8.7 percent fall. This is the biggest fall on record and was caused by the coronavirus crisis. Sales of clothing, furniture, restaurants, and bars, motor vehicles and parts, sporting goods, musical instruments and books, hobby, and electronics and appliances experienced the biggest declines. Receipts at gasoline stations fell sharply, following cutting back on their spending on fuel by consumers and a plunge in oil prices. On the other hand, sales of food and beverages and health and personal care products increased.

Forecast for April 2020: -11.0 percent

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