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Week ahead: April 30th – May 4th

Weekly outlook | Econ Alerts

All eyes on the Fed’s interest rate decision on Friday

 

Next week’s market movers

 

  • • China’s Manufacturing (Mfg) PMI for April and Germany’s preliminary HICP rate for April could grab the market’s attention on Monday.

 

  • RBA’s interest rate decision, Canada’s GDP growth rate for April, and the US ISM Mfg PMI for April could move the market on Tuesday.

 

  • • On Wednesday we’ll have a busy day as Fed’s Interest Rate Decision, New Zealand’s employment data for quarter 1 (Q1), China’s Caixin Mfg PMI for April, Eurozone’s preliminary GDP growth rate for Q1, Eurozone’s unemployment rate for March and the ADP National employment will be released.

 

  • • On Thursday the market is expected to shift its focus to the UK for the release of the Services PMI for April, to Europe for Eurozone’s preliminary release of the CPI rate for April and Norge’s Bank interest rate decision and last to the US for the ISM Non-Mfg PMI for April.

 

  • • Last but not least, on Friday, all eyes are expected to be on the US employment report for April.

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On Monday, during the Asian morning, we get China’s NBS Manufacturing PMI for April. The indicator is forecasted to drop a bit reaching 51.3 compared to the previous reading of 51.5.

Should the actual figure meet the forecast we could see the Aussie and the Kiwi weakening as the drop could imply that exports to China could be reduced, especially as the Caixin Mfg on Tuesday is forecasted to have a similar direction.

Later we get Germany’s preliminary HICP rate for April. The rate is forecasted to remain unchanged at +1.5% year on year (YoY).

Should the actual rate meet the forecast we could see the common currency slipping as such an outcome could be perceived by the market as a continuation of the stagnancy in Eurozone’s financial data.

 

On Tuesday, during the Asian morning, we get RBA’s interest rate decision. The bank is widely expected to remain on hold at +1.50%, with AUD OIS implying a probability of 99.57% for the bank to remain on hold currently.

Hence the market’s attention is expected to shift to the accompanying statement for more clues. At the April decision, there was a rather dovish accompanying statement where inflation was cited to remain low and the outlook for household consumption a continuing source of uncertainty. We see the case for the accompanying statement to retain a neutral to dovish tone as the inflation rate has remained unchanged at +1.9% and the consumer sentiment dropped and turned red at -0.6% for April. However, we will keep following developments until Tuesday and share any updates.

In the American session, we get Canada’s GDP growth rate. The rate is forecasted to accelerate to +0.1% month on month (MoM) compared to the previous reading of – 0.1% MoM.Should the actual reading meet the forecast we could see the CAD strengthening as the GDP growth rate gets a positive sign again.

Also, in the American session, we get the US ISM Mfg PMI for April. The indicator is forecasted to drop to 58.6 compared to the previous reading of 59.3. Should the forecast be realised we could see the USD weakening as it would be the second consecutive drop for the indicator.


On Wednesday, we start with the release of New Zealand’s employment data for the first quarter of 2018 (Q1), early in the Asian morning. The employment change is expected to decelerate to +0.2% quarter on quarter (QoQ) compared to the previous reading of +0.5% QoQ, the unemployment rate expected to tick up to 4.6% compared to the previous reading of 4.5% and the Labor Price Index is also forecasted to tick up, to 0.5% QoQ compared to the previous reading of 0.4% QoQ.

Overall, the employment data seem to show a slight slackening of the employment market should the forecasted readings meet the forecast. We could see the Kiwi slipping somewhat as the NZBA could prove sensitive to employment data due to the dual mandate it has.

Later in the Asian morning, we get China’s Caixin Mfg PMI for April. The indicator is forecasted to drop to 50.8 compared to the previous reading of 51.0. Should the actual results meet the forecast we could see the Kiwi and the Aussie slipping as it would be the second drop of a Chinese PMI indicator within the week.

In the European session, we get the preliminary release of Eurozone’s GDP growth rate for Q1. The rate is forecasted to tick down to +0.5% QoQ compared to the previous reading of 0.6% QoQ.

Should the forecast be realised we could see the EUR slipping again as the downtick could signal a continuation of Eurozone’s growth moderation and lukewarm financial results.

NFP compared to ADP | EconAlertsIn the American session, we get the US ADP National employment figure for April. The figure is forecasted to drop and reach +200K compared to the previous reading of +241K.

Should the actual result meet the forecast we could see the greenback weakening, as it might be perceived by the market, as a forerunner for the Non-Farm Payrolls figure on Friday and may moderate any expectations. Having said that, please note that we do not correlate the two financial releases nor do we consider the ADP National employment as a forerunner for the Non-Farm Payrolls on Friday.

Last but not least in the day we get the Fed’s interest rate decision. The Fed is forecasted to remain on hold at 1.75%, with current Feds Funds Futures (FFF) implying a probability of 95.2% for the bank to remain on hold. We share that view as the bank raised interest rates in the last meeting and the financial data which came out do not necessitate a further rate hike. The latest dot plot showed a three rate hike path for 2018 and we see the case for the next rate hike to be in the following meeting in June possible though not certain. As for the accompanying statement, it could be well balanced with a neutral to hawkish tone. The dot plot may be of special interest as it may result in an altered rate hike path for 2018. Overall, we could have a positive effect on the greenback, however, we are hesitant to call for a rally as there is still some water to flow under the bridge until the meeting.

 

On Thursday, in the European morning, Norges Bank is to announce its interest rate decision and is expected to remain on hold at +0.50%. Hence, the accompanying statement is expected to get the market’s attention. Given that the inflation rate remained unchanged at +2.2% and has not approached the bank’s target of 2.5%, we could see the bank not changing its forward guidance substantially.

US ISM Non Mfg PMI vs. UK Services | EconAlertsLater in the European session, we get UK’s services PMI for April. The indicator is forecasted to rise to a reading of 54.0 compared to the previous reading of 51.7.

Should the actual results meet the forecast we could see the GBP strengthening as the results could signal to the market that UK’s biggest sector of the economy is expanding and the difference of the readings is substantial.

In the European session, also the preliminary Eurozone CPI rate for April is due out. The rate is forecasted to tick up to +1.4% YoY compared to the previous reading of +1.3% YoY.

Should the actual result meet the forecast we could see the common currency getting some support at last as it could be perceived by the market as a positive signal for the EUR, after some time. However, with the French and the German HICP rates remaining unchanged we see the risks for the actual rate tilted to the downside.

In the American session, we get the US ISM Non-Mfg PMI for April. The indicator is forecasted to drop to 58.4 compared to the previous rate of 58.8.

Should the forecasts be realised we could see the greenback slipping as the drop of the indicator’s drop could be perceived by the market as substantial.

 

On Friday, the star of the day among the financial data to be released would be the US Employment Rata. The Non-Farm Payroll figure is currently forecasted to rise 198K compared to the previous reading of 103K, the unemployment rate is forecasted to tick down to 4.0% compared to the previous rate of 4.1% and the Average Earnings growth rate to remain unchanged at +2.7% YoY.

Should the actual results meet the forecast, we see the case for a rather strong report, indicative of a rather tightening labour market. The report could support the USD should the forecasts be realised, especially the Non-Farm Payrolls could be quite impressive.


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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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