Forex Major Currencies Outlook (Apr 15 – Apr 19)

USD

IMF cut global growth for 2019 to 3.3% from 3.5% for the weakest expected growth in a decade. They left the 2020 projection at 3.6% citing US-China war and Brexit as main uncertainties. US growth is cut to 2.3% from 2.5% while forecast for 2020 growth is raised to 1.9% from 1.8%. Eurozone growth is cut to 1.3% from 1.6% while China’s remains above 6% at 6.3% for 2019 and 6.1% for 2020. Projected growth for advanced economies is 1.8% while emerging economies will grow at rate of 4.4%.

March CPI inflation came in at 1.9% y/y vs 1.8% y/y as expected with prior reading showing 1.5% y/y. Beating on the headline number but core number dropped to 2% y/y vs 2.1% y/y as expected. Wages also dropped down to 1.3% y/y vs 1.9% y/y the previous month. Fall in core inflation and wages will give sign to FED that there is no need to rush with rate hikes. FOMC minutes showed majority of policy makers preaching patience. They see no need to raise rates in 2019.

This week we will have data on industrial production, balance of trades, consumption and housing data and preliminary PMI data for the month of April.

Important news for USD:

Tuesday:

• FED Industrial Production

Wednesday:

• Trade Balance
• Exports
• Imports

Thursday:

• Retail Sales
• Markit Manufacturing PMI
• Markit Services PMI
• Markit Composite PMI

Friday:

• Housing Starts
• Building Permits

EUR

German trade balance for the month of February came in at EUR17.9bn vs EUR16bn as expected. On the surface a great result, beating the expectation, however it was achieved with both exports and imports falling. Exports came in at -1.3% m/m vs -0.5% m/m as expected reflecting higher negative impact of global slowdown. Imports came in at -1.6% m/m vs -0.6% m/m as expected posing questions about weakening domestic demand. Italy’s debt to GDP ratio continues to expand and it is now projected to be at 132.6% for 2019.

ECB left interest rates unchanged as expected stating that rates should stay unchanged at least until the end of 2019. ECB will keep rates low for as long as necessary to ensure sustained convergence of inflation toward the 2% target. Governor Draghi stated in opening statement that inflation will likely decline in the coming months but will increase in the medium term. Ample degrees of stimulus are still needed. Employment gains and wages underpin economy, other data continues to be weak, especially in manufacturing. During press conference Draghi stated that it is too early to decide on tiered negative rates, further analysis is needed. The outlook is worsening growth however risk of Eurozone recession remains low. Draghi reiterated that ECB is ready to use all instruments at their disposal which is a very dovish message. Markets took it as such and EUR fell against the majors.

This week we will have data on sentiment in EU and Germany, final inflation rate for the month of March, trade balance data and preliminary PMI data for the month of April.

Important news for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Wednesday:

• CPI
• Trade Balance

Thursday:

• Markit Manufacturing PMI (EU, Germany, France)
• Markit Services PMI (EU, Germany, France)
• Markit Composite PMI (EU, Germany, France)

GBP

February GDP number came in at 0.2% m/m vs 0% m/m as expected and 0.3% 3m/m vs 0.2% 3m/m as expected. Encouraging beats signalling that UK’s economy is holding on in the midst of Brexit uncertainties. Both manufacturing and industrial output beat the expectations, however main cause of these good results is stockpiling due to the Brexit. Stockpiling is giving a boost to the economy now but it can be dangerous in the long run.

EU leaders have given an extension to the UK until October 31 with review in June. This is longer than PM May was hoping for but shorter than initial EU offering so compromise has been struck. This also means that UK will participate in EU elections, which are to be held in late May, unless a deal is struck before May 22. Extension shows that neither sides are willing to go for no deal Brexit. However, this six months extension puts more uncertainty for business, particularly decisions on investments or expansions and can have potentially devastating effects on UK economy.

This week we will have employment and wages data as well as data on inflation and consumption. Since Brexit is delayed and Parliament will be on recess due to Easter holidays next week we can expect higher weight to be given to the economic data.

Important news for GBP:

Tuesday:

• Claimant Count Change
• Unemployment Rate
• Average Weekly Earnings

Wednesday:

• CPI

Thursday:

• Retail Sales

AUD

RBA deputy governor Debelle assessed jobs market as surprisingly strong adding that leading indicators are strong. Tension between strength in jobs and weakness in output data is present not only in Australia but in many developed economies as well. Consumption growth was “considerable slower” in H2 of 2018 then RBA has expected and higher wages are needed for achieving inflation target. RBA could lower rates if the situation calls for it. This last statement suggests that RBA is in no rush to cut rates which has prompted Nomura to lower the probability of a rate cut. RBA Financial stability review showed that risks have increased in household sector and that consumption outlook is uncertain. Household debt levels remain high. Housing risks are considered manageable but they would increase in case of rise in the unemployment rate.

Chinese CPI for the month of March came in at 2.3% y/y as expected. Prior reading was 1.5% and jump in the CPI number was due to higher food prices, especially pork. Rising oil prices have also contributed to the jump in inflation. Trade balance surplus came in at $32.64bn vs $7.05bn as expected on the backs of rising exports (14.2% y/y vs 7.3% y/y as expected) and falling imports (-7.6% y/y vs -1.3% y/y as expected).

This week we will have meeting minutes from the latest RBA meeting as well as employment data. China will publish GDP and consumption data as well as data on industrial production and fixed investments.

Important news for AUD:

Tuesday:

• RBA Meeting Minutes

Wednesday:

• GDP (China)
• Retail Sales (China)
• Industrial Production (China)
• Fixed Asset Investment (China)

Thursday:

• Employment Change
• Unemployment Rate

NZD

Manufacturing PMI for the month of March came in at 51.9 vs 53.7 the previous month. Production and new order sub indexes were lower while employment sub index was higher. Electronic card sales came in at 0.7% y/y vs 3.4% y/y the previous month. Huge drop and considering that card sales constitute about 70% of core retail sales, this paints a bleak picture for the next retail sales as well as inflation report.

This week we will have bi-weekly GDT and inflation data.

Important news for NZD:

Tuesday:

• GDT Price Index

Wednesday:

• CPI

CAD

Housing starts for the month of March came in at 192.5k vs 194k as expected. Building permits came in at -5.7% m/m vs 2% m/m as expected. Second straight month of declining building permits. Canadian real estate is facing issues led by Toronto and Vancouver. New housing price index stayed at 0% m/m as expected.

This week we will have data on manufacturing sales, inflation, balance of trade and consumption.

Important news for CAD:

Tuesday:

• Manufacturing Sales

Wednesday:

• CPI
• Trade Balance
• Exports
• Imports

Thursday:

• Retail Sales

JPY

Current account for the month of February showed bigger than expected surplus coming in at JPY2676.8bn. Trade balance for the same period came in at JPY489.2bn vs JPY591.3bn as expected. Trade tensions have lowered exports and as a result trade balance suffered.

This week we will have data on balance of trade, industrial production, preliminary manufacturing PMI for the month of April and national inflation data.

Important news for JPY:

Wednesday:

• Trade Balance
• Exports
• Imports
• Industrial Production

Thursday:

• Nikkei Manufacturing PMI

Friday:

• CPI

CHF

The unemployment rate for the month of March came in at 2.4% as expected. Strong labour market, tight conditions still not transferring to inflation though.

This week we will have data on balance of trade.

Important news for CHF:

Thursday:

• Trade Balance
• Exports
• Imports

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_{Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets.
Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}