Forex Market Outlook for the Week May 28 – June 1, 2018

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Last week was very good for the U.S. dollar. The greenback made some handsome gains against most currencies. This is because there was a change in the main narrative from the greenback riding higher on yields to gaining on the sentiment related to a reduction in risk. However, what was notable was that the U.S. dollar lost ground against the Japanese yen, the ultimate safe-haven currency. Worries about China-US trade relations and Trump-Kim Summit did have some impact on the markets. Meanwhile, the weak PMI data put pressure on the euro and the pound suffered because of slower inflation.

The economic data releases scheduled for the upcoming week include U.S. GDP and the Non-Farm Payrolls. There are some key releases from elsewhere in the world as well. Here is an outlook on some of the key events:

#1: U.S. Consumer Board Consumer Confidence (05/29/2018 Tuesday 14:00 GMT)

forex market outlookThe U.S. Consumer Board consumer confidence index unexpectedly rose in the month of April to its second-highest level ever since 2000. This is because Americans grew more upbeat as regards both the current conditions and economic outlook. The consumer confidence index climbed to 128.7 from 127.0 in the previous month. While the present conditions gauge rose to 159.6 from 158.1, the consumer expectations measure increased to 108.1 from 106.2. As the survey of the University of Michigan in May has indicated stability, the Consumer Board’s figure is likely to continue to remain at the current levels. Forecast for May 2018: 128.2

#2: New Zealand Central Bank Financial Stability Report (05/29/2018 Tuesday 21:00 GMT)

The Reserve Bank of New Zealand publishes the Financial Stability Report once in six months. In the report released in November last year, the central bank noted that the financial system in New Zealand is sound with the banking system maintaining adequate buffers in excess of the minimum capital requirements. Stress tests also suggested that the banks have the ability to withstand an economic downturn.

Overall, the country’s banking system is operating efficiently even though the tightening of the lending standards has slowed down credit growth. Further, there has been a reduction in the risks over the last six months. Traders look forward to the release of this report as it provides insight into the central bank’s view on growth, inflation, and other economic factors that have an impact on interest rate decisions in the future. A media conference is often organized 120 minutes after the release of the Financial Stability Report.

#3: Japan Central Bank Governor Kuroda Speaks (05/30/2018 Wednesday 00:00 GMT)

Haruhiko Kuroda, Governor of the Bank of Japan, is scheduled to speak in Tokyo at the annual conference of the central bank’s Institute for Monetary and Economic Studies. Markets often remain volatility during his speeches. This is because traders look for interest rate clues.

#4: New Zealand Central Bank Governor Orr Speaks (05/30/2018 Wednesday 01:10 GMT)

Adrian Orr, Governor of the Reserve Bank of New Zealand, is scheduled to testify in Wellington before the Parliament Select Committee on the Financial Stability Report. Markets often remain volatile during his speeches. This is because traders look for interest rate clues.

#5: U.S. ADP Non-Farm Employment Change (05/30/2015 Wednesday 12:15 GMT)

In the U.S., private businesses hired 204,000 workers in the month of April after the figure for the prior month was revised downward a little. Analysts had expected the reading to come in at 200,000. The service-providing sector was boosted by business and professional; education and health; leisure and hospitality; transportation, trade, and utilities; financial activities; and other services sectors. Information sector lost 2,000 jobs. The goods-producing sector was supported by manufacturing, construction, and mining and natural resources sectors. Midsized companies hired the most numbers of workers, followed by small and large companies. Forecast for May 2018: addition of 186,000 jobs in the private sector

#6: U.S. GDP (05/30/2018 Wednesday 12:30 GMT)

The American economy grew at an annualized rate of 2.3 percent on a quarter-on-quarter basis in the March quarter of this year, down from the 2.9 percent growth recorded in the prior period. The reading for the quarter, however, beat analysts’ expectation of a 2.0 percent growth. It is the lowest expansion rate in one year. The GDP expansion in real terms reflected that the contributions from personal consumption expenditures, exports, nonresidential fixed investment, private inventory investment, local and state government spending, and federal government spending were positive. The second estimate for first quarter 2018 GDP: 2.3 percent

#7: Canada Central Bank Rate Statement (05/30/2018 Wednesday 14:00 GMT)

The Bank of Canada releases the rate statement eight times in a year. The central bank uses it as a tool for communicating with the investors as regards the monetary policy. It consists of the outcome of the members’ decision on interest rates and a commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and clues on the direction of future decisions.

#8: Canada Overnight Rate (05/30/2018 Wednesday 14:00 GMT)

The Canadian central bank decided to hold the overnight rate at the 1.25 percent level during the meeting in April. This was in line with analysts’ expectations. According to the policymakers, higher gasoline prices and minimum wage increases in the recent times are likely to cause an increase in the inflation rate during the current year to a modestly higher level than anticipated. Further, the economy is expected to operate at a level that is slightly better than its potential during the next couple of years. As such, the central bank expects the interest rates to move higher over time even though some amount of monetary policy accommodation may be needed to keep the inflation at the targeted level. Forecast for May 2018: 1.25 percent

#9: Switzerland Central Bank Chairman Thomas Jordan Speaks (05/30/2018 Wednesday 14:45 GMT)

Thomas Jordan, Swiss National Bank Governing Board Chairman, is scheduled to speak on “Innovation and Entrepreneurship: Success Factors in a Changing Economic World” in Switzerland at the De Vigier Foundation Awards Ceremony. Markets often remain volatile during his speeches. This is because traders look for interest rate clues.

#10: New Zealand ANZ Business Confidence (05/31/2018 Thursday 01:00 GMT)

The survey carried out by ANZ showed that a net 23.4 percent of businesses in New Zealand were pessimistic as regards the next one year in April 2018. The index dropped 3.4 points from its level in March. All of the sectors were in the red. The services sector was the least pessimistic, while the agriculture sector was the most pessimistic. Though agriculture managed to register a small gain in March, the construction sector plummeted to the lowest level ever since 2008. The views of firms about their own activity eased to +18 from +22 in the prior month as the index for the construction sector fell by 38 points.

#11: Australia Private Capital Expenditure (05/31/2018 Thursday 01:30 GMT)

In Australia, private capital expenditure unexpectedly declined by 0.2 percent on a quarter-on-quarter basis in the final quarter of last year after the reading for the prior quarter was revised upward to represent a growth of 1.9 percent. The reading for the fourth quarter of last year missed analysts’ expectation of a 0.9 percent increase. The private capital spending declined for the first time ever since the final quarter of 2016, following a fall in expenditure in buildings and structures. On a year-on-year basis, private capital expenditure increased by 4.0 percent in the December quarter of last year. Forecast for the first quarter of 2018: an increase of 1.1 percent

#12: Canada GDP (05/31/2018 Thursday 12:30 GMT)

Canada reported that its economy expanded 0.4 percent on a quarter-on-quarter basis in the final quarter of last year, the same as in the prior period. Growth was boosted by residential structures and higher business investments. On an annualized basis, the Canadian economy expanded 1.7 percent, higher than the 1.5 percent reported for the previous quarter. Analysts had expected a 2.0 percent growth. Forecast for the first quarter of 2018: 0.2 percent expansion

#13: U.S. Crude Oil Inventories (05/31/2018 Thursday 15:00 GMT)

In the U.S., crude oil stocks rose by 5.778 million barrels during the week that ended on May 18 after the 1.404 million barrels decline in the prior period. Analysts had expected crude oil stocks to drop by 1.567 million barrels. Gasoline inventories also rose by 1.883 million barrels, following the decrease of 3.790 million barrels in the prior week. Analysts had expected a drop of 1.388 million barrels. Crude oil and gasoline stocks rose for the first time after declining for two weeks in a row.

#14: U.K. Manufacturing PMI (06/01/2018 Friday 08:30 GMT)

In the U.K., the IHS Markit/CIPS Manufacturing PMI dropped to the 53.9 level in April after the reading for the prior month was revised downward to the 54.9 level. The reading for the month also missed analysts’ expectation that it would come in at the 54.8 level. The reading indicated the weakest rate of expansion since November 2016. This is because new orders and output growth eased out, while exports rose by the least amount in as many as ten months. Further, the business optimism declined to the five-month low level and the job creation rate eased to the weakest level in 14 months. Falling work backlog, supply-chain constraints, an increase in finished goods stocks indicated that output growth would remain subdued during the coming months. Meanwhile, input cost inflation eased to the lowest level in nine months and output charges increased the least ever since last August. Forecast for May 2018: 53.5

#15: U.S. Average Hourly Earnings (06/01/2018 Friday 12:30 GMT)

In the U.S., the average hourly earnings of all employees on private nonfarm payrolls increased 0.1 percent to $26.84 in April after the reading for the prior month was revised downward to represent a gain of 0.2 percent. Analysts had expected the average hourly earnings to increase 0.2 percent. On a year-on-year basis, the average hourly earnings rose by 2.6 percent. Forecast for May 2018: 0.3 percent increase

#16: U.S. Non-farm Employment Change (06/01/2018 Friday 12:30 GMT)

In the U.S., the non-farm payrolls rose by 164,000 in April after the figure for the prior month was revised upward to 135,000. However, the reading for April came in well below analysts’ expectation of 192,000 job additions. More workers were hired in business and professional services, manufacturing, mining, and healthcare sectors. Forecast for the May 2018: 190,000 job additions in the non-farm segment

#17: U.S. Unemployment Rate (06/01/2018 Friday 12:30 GMT)

In the U.S., the unemployment rate declined to the 3.9 percent level in April from 4.1 percent reported for the prior month. The reading came in below analysts’ expectation of 4.0 percent. This was the lowest level ever since December 2000 as 236,000 people left the labor force. The number of unemployed people in America decreased 239,000 to 6.35 million. Employment remained unchanged at 155.18 million. Forecast for May 2018: 3.9 percent

#18: U.S. ISM Manufacturing PMI (06/01/2018 Friday 14:00 GMT)

In the U.S., the survey carried out by the Institute for Supply Management showed that the Manufacturing PMI declined to the 57.3 level in the month of April 2018 from the 59.3 level in the prior period. This is against the analysts’ expectation that the index will hit the 58.3 level. The reading for April indicated the weakest rate of expansion since July last year in the manufacturing sector as production, new orders, and employment rose at a softer pace.

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