Forex Major Currencies Outlook (Apr 29 – May 3)

USD

Existing Home Sales dropped to 5.21 million in March vs 5.48 million the previous month. Building Permits and Housing Starts, that were published last week, both missed expectations. New Home Sales came in at 692k vs 649k for a nice beat. Median price of houses offered was lower than last year so housing market is not as strong as headline number shows.

Preliminary reading of durable goods for the month of March came in at 2.7% m/m vs 0.8% m/m as expected. This is a huge beat giving more support to the USD strength across the markets and demonstrating the health of the US economy. Capital goods orders non-defence ex air category came in at 1.3% m/m vs 0.2% m/m which is the highest reading since July 2017.

Preliminary Q1 GDP came in at 3.2% vs 2.3% as expected. Net trade which added 1.03 basis points to GDP (largest in six years) and inventories which added 0.65 basis points to the GDP were main contributors. Personal consumption came in at 1.2% vs 1% as expected. Government spending added 0.41 basis points to GDP. 2084 Q4 GDP was revised down to 2.2% from 2.6% and inflation data came in weaker than expected and way below the previous reading. Surprisingly low inflation contributed to the rise in GDP. USD was higher on the headline but upon further inspection it was determined that it was all about temporary factors and that underlying consumption and business investment were soft. That brings concerns about Q2 GDP and sent USD lower.

This week we will have inflation and housing data as well as PMI and trade balance data. We will have two main events of the week. First one is FOMC interest rate decision followed by press conference on Wednesday. Interest rate will not be changed however any new information on further guidance from FED will be closely monitored. The other event is NFP which traditionally comes every first Friday in the month. After abysmal data in February NFP has recovered in March and it is expected to continue on that pace with forecast lying at around 180k. Average hourly earnings are expected to rise to 3.4%.

Important news for USD:

Monday:

• PCE

Tuesday:

• Pending Home Sales
• Consumer Confidence Index

Wednesday:

• ISM Manufacturing PMI
• FOMC Interest Rate Decision
• FOMC Statement
• FOMC Press Conference

Thursday:

• Factory Orders

Friday:

• Nonfarm Payrolls
• Unemployment Rate
• Average Hourly Earnings
• ISM Non-Manufacturing PMI
• Goods Trade Balance

EUR

Consumer confidence for the month of April came in at -7.9 vs -7 as expected. Confidence continues to deteriorate further as consumers do not see the light at the end of the tunnel for the EU. German Ifo business climate index came in at 99.2 vs 99.9 as expected. Business climate index declined as well as expectations and current assessment categories. Ifo economists now see German growth below previous forecast of 0.8% stating troubles in industrial sector and Brexit as main drags on German economy.

This week we will have data on business conditions and consumer confidence, unemployment and final manufacturing PMI reading for the month of April. We will also have preliminary readings of Q1 GDP on Tuesday and inflation on Friday.

Important news for EUR:

Monday:

• Business Climate
• Consumer Confidence Index

Tuesday:

• GDP
• Unemployment Rate
• CPI (Germany)

Thursday:

• Markit Manufacturing PMI (EU, Germany, France)

Friday:

• CPI 

GBP

The new rumours surrounding the Brexit state that top lawmaker from PM May’s party will tell her that she will have to quit by the end of the June or other party members will again try to oust her out. May survived the last leadership challenge back in December meaning that her position as a party leader cannot be challenged within a year. However, the reports say that the chair of the 1922 Committee, Graham Brady, may be in on this coup here to see that rule is changed allowing for another vote of no confidence. BBC reports that there is no plan to bring back a withdrawal bill for voting next week and House of Commons leader Andrea Leadsom confirmed that next week there will be no Brexit items on the agenda.

This week we will have PMI numbers and the main event will be the BOE interest rate decision accompanied by meeting minutes and speech by governor Carney. Interest rate is expected to stay the same so further assessment of the Brexit situation by BOE will be monitored.

Important news for GBP:

Wednesday:

• Markit Manufacturing PMI

Thursday:

• Markit Construction PMI
• BOE Interest Rate Decision
• BOE MPC Meeting Minutes
• BOE Governor Carney Speech

Friday:

• Markit Services PMI

AUD

Headline Q1 inflation came in at 0% q/q vs 0.2% q/q as expected and 1.3% y/y vs 1.5% y/y as expected. Core inflation, trimmed mean, came in at 0.3% q/q vs 0.4% q/q as expected and 1.6% y/y vs 1.7% y/y as expected. Unexpected drop in inflation may move RBA in the rate cut direction since inflation is below their targeted band. Expectations of a rate cut for May 7 have jumped and are now at almost 40%. Rate cut for July is around 80% probability.

This week we will have official PMI numbers from China as well as Caixin manufacturing PMI.

Important news for AUD: 

Tuesday:

• Manufacturing PMI (China)
• Non-Manufacturing PMI (China)
• Caixin Manufacturing PMI (China)

NZD

Trade balance for the month of March came in at NZD922m vs NZD131m as expected. Exports rose to NZD5.7bn for a healthy beat while imports fell to NZD4.77bn. Imports will be classified as underwhelming throwing some shade to domestic consumption, however beating on exports will be welcomed.

This week we will have employment data.

Important news for NZD:

Wednesday:

• Employment Change
• Unemployment Rate

CAD

BOC has left the rate unchanged at 1.75% as expected. In the accompanying statement they have acknowledged that growth has slowed more than they previously forecast. Growth is expected to be slower than in H1 of 2019 than forecast. Investment and exports outside the energy sector have been negatively affected by trade policy uncertainty and the global slowdown. Weaker-than-anticipated housing and consumption also contributed to slower growth. BOC has removed hiking bias from their statement and slashed growth which sent CAD tumbling. Annualized Q4 GDP forecast was cut to 0.4% from 1.3%, Q1 GDP forecast was also cut to 0.3% from 0.8%

and 2019 GDP growth forecast was cut to 1.2% from 1.7%.

This week we will have GDP figure for the month of February along with manufacturing PMI.

Important news for CAD:

Tuesday:

• GDP

Wednesday:

• Markit Manufacturing PMI

JPY

BOJ left the rates unchanged at -0.1% as widely expected. BOJ stated that they will keep low interest rates for the extended period of time, at least through around spring of 2020 to support the economy. Median CPI forecast for 2019/20 stays at 1.1% while for 2020/21 it is lowered to 1.4% from 1.5% in the January. Median GDP forecast for 2019/20 is lowered to 0.8% from 0.9% projected in January and 2020/21 is seen at 0.9%, down from 1% from January. BOJ admitted they will not reach inflation target of 2% for three more years. They will consider the introduction of an Exchange-Traded Fund (ETF) lending facility, which would allow lending of ETFs that the Bank holds to market participants. Risks to price outlook and economic outlook are skewed to downside.

Headline Tokyo CPI number for the month of April came in at 1.4% y/y vs 1.1% y/y as expected with CPI ex fresh food rising to 1.3% y/y vs 1.1% y/y as expected. Good numbers that are used as guide for the national CPI which will be published in 3 weeks. Jobless rate for the month of March came in higher at 2.5% vs 2.4% as expected and 2.3% the previous month. Preliminary industrial production came in at -0.9% m/m vs 0% m/m as expected while retail sales came in at 0.2% m/m vs 0% m/m as expected.

CHF 

SNB Jordan said in his speech that rates will eventually turn to positive and it depends on inflation and FX developments. Negative rates remain necessary and supportive of the economy. Raising rates at this moment would hurt the economy.

This week we will have data on consumption and all-important inflation.

Important news for CHF:

Thursday:

• Retail Sales

Friday:

• CPI

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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.
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