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Week ahead: April 23rd-27th

Weekly Outlook | Econ Alerts

BoJ, ECB and Riksbank interest rate decisions, Japan’s, France’s, Eurozone’s, and US PMI’s as well as Australia’s and France’s inflation data and other financial data of the next week in focus.

 

Next week’s market movers

 

    • • Japan’s, France’s, Germany’s, Eurozone’s and US PMI’s, all of the preliminary releases for April, could grab the market’s attention on Monday.

     

    • • Australia’s Inflation data for the first quarter of 2018, Germany’s Ifo business climate for April and US consumer confidence also for April could move the market on Wednesday.

     

    • • On Thursday the market is expected to shift its focus to Europe for Riksbank’s and ECB’s interest rate decisions.

     

    • • Last but not least, on Friday, BoJ’s interest rate decision, France’s preliminary CPI (EU Norm.) for April, Germany’s employment data for April as well as UK and US preliminary releases of GDP growth rates for the first quarter of 2018 could be the market’s center of discussion.

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On Monday, during the Asian morning, we get Japan’s preliminary Nikkei Manufacturing PMI release for April. The last reading of was of 53.1. Any reading higher than 53.1 could support the JPY as it could imply an expansion of the manufacturing sector of Japan.

US, Japan's and Eurozone's PMI's | EconAlertsLater in the European session, we get France’s Germany’s and Eurozone’s preliminary (P) manufacturing (Mfg) PMI’s for April. France’s Mfg (P) PMI has currently no forecast, however, any reading higher than the previous reading of 53.7 could support the common currency. Germany’s (P) PMI for April is forecasted to drop to 57.6 compared to the previous reading of 58.2 and could weaken the EUR. Last comes in the European session, Eurozone’s preliminary Mfg PMI for April and is forecasted to drop to 56.1 compared to the previous reading of 56.6. Should the forecast be realised we could see the common currency slipping. Overall, please be advised that Eurozone’s PMI’s are on the back-foot for the third consecutive months and the indicators gain in importance as they are issued ahead of ECB interest rate decision later this week.

In the American session, we get the preliminary release of the US Manufacturing PMI for April. The PMI is forecasted to drop to 55.0 compared to the previous reading of 55.6. Such a result could weaken the greenback. The market’s reaction could be somewhat muted as the indicator remains at rather high levels.

 

On Tuesday, during the Asian morning, we get Australia’s CPI rate for the first quarter of 2018. The rate is forecasted to accelerate and reach +2.0% year on year (YoY) compared to the previous reading of +1.9% YoY.

Should the actual reading meet the forecast we could see the AUD strengthening as the inflation rate would enter again (after one year) the target range of the RBA of 2.00%-3.00% YoY. Inflationary pressures could mount pressure on the RBA for a more hawkish stance. In the European session, we get Germany’s Ifo Business Climate for April. The indicator is forecasted to drop to 103.0 compared to the previous reading of 114.7.

Should the forecast be realized we could see the common currency weakening as the drop is considerable and would be a further indication of the overall stalemate which could characterise under certain circumstances not only the German economy but Eurozone as a whole.

In the American session, we get the US consumer confidence indicator for April. The indicator is forecasted to drop to 125.0 compared to the previous reading of 127.7.

Should the actual reading meet the forecast we could see the USD weakening as it could be the second bad news of the week.

 

On Wednesday, no major events are expected.


On Thursday, in the European morning, Riksbank will announce its interest rate decision. The market widely expects the bank to remain on hold at -0.50% and SEK Overnight Indexed Swaps support that notion as it implies a probability of 93.01% for the bank to remain on hold. Also, an inflation rate of +1.9% YoY (near but not over the bank’s target of +2.0% YoY), and a dropping GDP growth rate of +3.1% YoY (compared to the previous reading of +4.0% YoY) could suggest that the bank will continue its accommodating policy at this meeting as well. We consider that the main issue will be in the accompanying statement and whether there will be any further dovish comments that could postpone any possible hikes further into the future, hence providing for further weakening of the SEK. The following press conference could continue in the same mood as the accompanying statement.

Later on, market focus will be on the ECB interest rate decision. The market widely expects the bank to remain on hold at 0.00%, and such a scenario is backed by EUR OIS which implies a probability of 98.38% (practically a done deal) for the bank to remain on hold. Again the market’s focus will shift to the accompanying statement and the following press conference. We could see the ECB repeating the scenario for gradual changes on its massive quantitative easing program citing a weak inflation rate, maybe even the recent financial readings. Overall, should there be no fresh perspective for the EUR, we could see it weakening. We’ll keep an eye out especially after the release of Monday’s PMI’s for any further developments.

 

On Friday, during the Asian morning, BoJ will announce its interest rate decision. The bank is widely expected to remain on hold at -0.10% and JPY OIS support that scenario with currently, an implied probability of 94.80% for the bank to remain on hold. The recent slowdown of the inflation rate to +1.1% YoY (compared to the previous reading of +1.5% YoY) could suggest a continuation of the ultra- easing monetary policy of the bank, both in the interest rate as well as its qualitative and quantitative easing program. Please be advised that Kuroda’s recent smooth reappointment as BoJ governor, could provide the prementioned continuation also. As in the EUR story, should there be no fresh direction from BoJ for JPY, we could see the yen weakening against its major counterparts.

In the European session, we get France’s preliminary CPI (EU Norm.) for April. The rate is forecasted to remain unchanged at +1.7% YoY compared to previous reading. Should the actual results meet the forecast we could see the EUR strengthening somewhat despite the lack of acceleration as it remains at rather high levels.

Later in the European session, we get Germany’s Employment data for April. The Unemployment rate is currently forecasted to remain unchanged at 5.3% while the unemployment change is forecasted to reach -15k compared to the previous reading of -19k. Should the actual results meet the forecast we could see the EUR staying unaffected or slipping a bit as the reduction of the unemployed is lower in absolute numbers.

Last in the European session is the preliminary release of the UK’s GDP growth rate for the first quarter of 2018. The rate is forecasted to tick down to +0.3% quarter on quarter (QoQ) compared to the previous reading of +0.4% QoQ. Should the actual readings meet the forecast we could see the pound weakening.

In the American session, we get the US preliminary release of the GDP growth rate for the first quarter of 2018. The rate is currently forecasted to decelerate to +2.0% QoQ compared to the previous respective reading of +2.9% QoQ. Should the actual readings meet the forecast we could see the USD weakening as the deceleration is substantial.


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Disclaimer:
This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.


source: FXGiants

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