Forex Market Outlook For The Week May 20 – 24, 2019

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Last week, the trade war between China and the U.S. worsened after the former retaliated. This rattled the financial markets rattled. China imposed tariffs on U.S. goods and hinted that it would go further in this regard. While the stock markets fell, the safe-haven yen registered some handsome gains. The pound lost ground following the impasse in Brexit talks. The commodity currencies also remained weak in spite of the rise in tensions within the Persian Gulf region.

In the upcoming week, US durable goods orders, the FOMC minutes, and events from other parts of the world are expected to rock markets apart from Brexit and trade tariff issues. Here is an outlook for the coming week:

#1: U.S. Fed Chair Jerome Powell Speaks (05/20/2019 Monday 23:00 GMT)

forex market outlookJerome Powell, U.S. Fed Chair, is scheduled to deliver a talk titled “Assessing Risks to Our Financial System” in Florida at the Financial Markets Conference. The audience is expected to ask questions. Markets often turn volatile during his speeches as traders make an attempt to understand the direction of interest rates.

#2: Australia RBA Monetary Policy Meeting Minutes (05/21/2019 Tuesday 01:30 GMT)

The Reserve Bank of Australia releases the minutes of the Monetary Policy Meeting two weeks after the announcement of the Cash Rate. It provides a detailed account of the most recent meeting of the RBA’s Reserve Bank Board. It also includes an in-depth analysis of the economic conditions that impacted the members’ decision on setting interest rates.

#3: U.K. Inflation Report Hearings (05/21/2019 Tuesday 08:30 GMT)

The Governor of the Bank of England and Monetary Policy Committee members testify on a quarterly basis on inflation as well as the country’s economic outlook before the Treasury Committee of the Parliament. The hearings go on for a few hours and often create market volatility, especially the direct comments on the currency markets.

#4: New Zealand Retail Sales (05/21/2019 Tuesday 22:45 GMT)

In New Zealand, retail trade rose by 1.7 percent on a quarter-on-quarter basis in the December quarter of last year after the reading for the prior period was revised upward to represent an increase of 0.3 percent. The reading for the reported period came in above analysts’ expectations for an increase in retail sales of 0.5 percent. This is the biggest gain ever since the January quarter of 2017. Sales rebounded for pharmacies and store-based retailers, food and beverage service providers; specialized food outlets, and motor vehicles and parts retailers. Non-store and commission-based retailers; clothing, footwear, and accessories retailers; electrical and electronic goods retailers; accommodation providers; and fuel outlets enjoyed better sales during the period. Forecast for the first quarter of 2019: retail trade is expected to increase by 0.6 percent

#5: Australia RBA Governor Philip Lowe Speaks (05/22/2019 Wednesday 02:15 GMT)

Philip Lowe, Governor of the Reserve Bank of Australia, is scheduled to speak on the subject “economic outlook and monetary policy” in Brisbane at the business lunch organized by Economic Society of Australia. Markets often turn volatile during his speeches as traders make an attempt to understand the direction of interest rates.

#6: U.K. CPI (05/22/2019 Wednesday 08:30 GMT)

In the U.K., the annual inflation rate came in at 1.9 percent in the month of March. The reading was unchanged from that for the previous month. However, the reading for March came in below analysts’ expectations of 2.0 percent. Price increases slowed down for food and non-alcoholic beverages providers, while the transport costs rose further. Inflation remained steady for utilities and housing. Forecast for April 2019: 2.20 percent

#7: Canada Core Retail Sales (05/22/2019 Wednesday 12:30 GMT)

In Canada, retail sales, excluding autos, rose to 0.60 percent in the month of February, rebounding from the 0.60 percent decline reported in January. Forecast for March 2019: Retail trade is expected to increase by 0.8 percent

#8: U.S. FOMC Meeting Minutes (05/22/2019 Wednesday 18:00 GMT)

The U.S. FOMC releases the minutes of the monetary policy meeting three weeks after the announcement of the Federal Funds Rate. It provides a detailed account of the most recent FOMC meeting and offers in-depth insights into the financial and economic conditions that impacted their decision on setting interest rates.

#9: France Flash Services PMI (05/23/2019 Thursday 07:15 GMT)

In France, the IHS Markit Services PMI for the month of April came in at a five-month high level of 50.5 from the 49.1 level in the prior month. The reading for April was in line with analysts’ expectations. Improved demand conditions drove new business up for the very first time ever since November 2018. The rate of creation of jobs also accelerated. Costs continued to increase sharply in spite of easing of the inflation rate to its softest level in a year and output prices rose at the fastest pace since January. Forecast for May 2019: 50.7

#10: German Flash Manufacturing PMI (05/23/2019 Thursday 07:30 GMT)

In Germany, the IHS Markit/BME Manufacturing PMI was revised downward to 44.4 in the month of April from the preliminary estimate of 44.5. In March, the index was at its 80-month low level of 44.1. Both new orders and output continued to contract sharply. New export sales also contracted. However, capacity pressures continued to dissipate, leading to another modest decline in employment and a marked improvement in delivery times by suppliers since May 2009. Purchase price inflation was just fractionally higher than the 32-month low reported in March as higher prices of oil and wage pressures largely offset the lack of the pricing power of suppliers and fall in steel costs and related product prices. Output price increase slowed down for the fourth straight month to its weakest level ever since November 2016. Forecast for May 2019: 44.9

#11: German Flash Services PMI (05/23/2019 Thursday 07:30 GMT)

In Germany, the IHS Markit Services PMI was revised upward to the seven-month high reading of 55.7 in the month of April from the preliminary estimate of 55.6 reported earlier. In the previous month, the index stood at 55.4. Growth in new orders increased at the strongest rate ever since September last year in spite of a decline in overseas new work inflows. The rate of creation of jobs hit the fastest pace since October 2007. Outstanding business rose for the third month in a row, although at a slow rate. Input cost inflation rose to the highest level in three months boosted by an increase in wages and rises in rents and energy costs. Forecast for May 2019: 55.2

#12: Euro Area European Parliamentary Elections (05/23/2019, 05/24/2019, and 05/25/2019)

In the European Parliament elections scheduled to be held over three days, citizens from 28 member states, which includes the UK as well, will vote for the election of new members. The body, with bases in Brussels and Strasbourg, has only limited influence over European matters, but a lot of importance is attached to its voice and composition. Anti-immigration and eurosceptic parties are expected to garner considerable gains following five turbulent years of immigration and Brexit crisis, Donald Trump’s victory in the U.S. elections, rise in employment, and high uncertainty as regards the future. If the radical parties succeed in garnering substantial gains, the euro may lose its value a little bit. There will be a special focus on voting in the UK. If the performance of the ruling Conservative Party remains poor, there may be pressure on Prime Minister Theresa May to resign. An unimpressive poll outcome for the opposition Labour Party might also widen the internal divide. The poll may also prove to be a turning point for the Brexit drama.

#13: U.K. Retail Sales (05/24/2019 Friday 08:30 GMT)

In the U.K., retail trade jumped 1.1 percent on a month-on-month basis in March, defying analysts’ expectations for a 0.3 percent decline. The figure for February was revised upward to an increase of 0.6 percent. Food stores and non-store retailers provided the largest contributions towards the increase.

#14: U.S. Core Durable Goods Orders (05/24/2019 Friday 12:30 GMT)

In the U.S., core durable goods orders, which exclude transportation, rose by 0.4 percent in March after the reading for the prior month was revised downward to a decline of 0.2 percent. Analysts had expected an increase of 0.2 percent in core durable goods orders.

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