Trading Forex and CFDs is risky
Read HotForex Daily Market Analysis

The Economic Week Ahead

Market Analysis

It was a swing and a miss on U.S. CPI Friday, following Thursday’s below forecast PPI report. Headline retail sales also undershot estimates, though upward revisions to February and March improved the complexion of that report. Meanwhile, consumer sentiment continued to beat expectations to extend the gap between “soft” and “hard” data. The data resulted in modest lessening in the risk of a Fed tightening next month, though the probability is still over 70%. Yet, the chances for another hike in September were trimmed to about 40% from around 50-50 previously.

United States: Despite the weakness in some of the recent U.S. reports, data are still consistent with a rebound in Q2 GDP after a sluggish 0.7% clip for Q1, and upcoming reports on manufacturing, production, and housing should burnish that relatively bullish outlook. Specifically, the economic calendar is a fairly limited this week with a smattering of housing, production, Philly Fed, claims and LEI data on tap. The Empire State index is forecast to rebound (Monday) to 9.0 in May from 5.2 in April. Housing starts should increase to a 1,260k pace in April from 1,215 in March (Tuesday), though risk is downward as construction employment slips in May. Industrial production is expected to rise 0.4% (Tuesday) in April from 0.5% in March, while capacity utilization may increase to 76.3% from 76.1%. MBA mortgage applications (Wednesday) will have to account for the swings in yields between the uptick in PPI and slump in CPI the week prior, while EIA energy inventories are on tap as well. Data rounds out (Thursday) with a rash release, including the Philly Fed index seen slipping to 20.0 for May from 22.0. Initial jobless claims may rebound 5k to 241k  for the May 13 week and leading indicators are forecast to rise 0.2% in April vs 0.4% in March.

Canada: In Canada, the end of the week brings March retail sales (Friday) and April CPI (Friday). The lead up to those key releases is rather less exciting, with a choppy calendar that has March manufacturing (Wednesday) and April existing home sales (Monday). Total CPI expected to rise 0.5% in April, driven by the run-up in gasoline prices, after the 0.2% gain (m/m, nsa) in March. The CPI is expected to accelerate to a 1.8% growth rate in April on an annual comparable basis from the 1.6% y/y pace in March. Retail sales are expected to bounce 1.0% m/m in March after the 0.6% drop in February. The ex-autos aggregate is seen improving 0.7% on the heels of the 0.1% dip in February. Manufacturing shipments are projected to recover 1.0% m/m in March after the 0.2% decline in February. The international transactions in securities for March will be released Thursday. The Bank of Canada is silent this week. Next week sees the rate announcement (May 24), which is expected to result in no change to the current 0.50% rate setting or the cautiously constructive outlook on growth and inflation that backs our projection for no change in rates through year-end.

Europe: Political risk has receded with Macron’s election victory, and while this is unlikely to be the last challenge to the unity of the Eurozone or the EU, it paves the way for Draghi to move to a neutral stance on rates at the June meeting. ECB speak from Draghi (Thursday), Constancio, Praet and others will likely confirm this, but also stress once again that the Eurozone still needs substantial monetary support and the current QE schedule will be implemented as planned. The data highlight this week is German ZEW Investor Confidence (Tuesday), which is seen increasing to 21.0 from 19.5 reflecting reduced political uncertainty, improving growth and rising stock markets. Other data are mainly backward-looking. Eurozone Q1 GDP (Tuesday) is expected to be confirmed at 0.5% q/q and 1.7% y/y, in line with the preliminary number. March trade data (also Tuesday), will add background information amid the lack of a full breakdown. Meanwhile final April EMU HICP (Wednesday) should confirm the headline rate at 1.9% y/y and core at 1.2% y/y. The data calendar also includes Eurozone current account and balance of payment numbers for March, as well as German producer price inflation for April. Supply comes from Germany, which will issue 30 year Bunds on Wednesday. Spain and France follow with bond auctions on Thursday.

UK: The calendar is highlighted by April inflation data (Tuesday), labor market figures covering March and April (Wednesday), and the official retail sales report for April (Thursday). CPI expected to spike to a new cycle high of 2.6% y/y from the 2.3% print seen in the month prior. The 15%-odd y/y decline in sterling and the approximate 10% gain in the y/y oil price comparison underpins this forecast. The BoE last week in its quarterly inflation report said that CPI should come back down to its 2.0% target over the next year, and highlighted the disinflationary effects of recent currency gains. As for the labour data, the March ILO unemployment rate anticipated to remain unchanged at 4.7%. In-line data shouldn’t have too much impact on sterling.

Japan: Japan’s docket kicks off on Monday with April PPI, which expected to rise to 1.6% y/y from 1.4% previously. The March tertiary industry index (Tuesday) should fall 0.1% m/m versus the 0.2% increase in February. Revised March industrial production is also due Tuesday. March machine orders (Wednesday) are penciled in at up 5.0% m/m versus the 1.5% rise seen previously. Preliminary Q1 GDP (Thursday) should rise 1.6% q/q as compared to the 1.2% increase in Q4.

Australia: Australia’s calendar is headlined by the employment report (Thursday), expected to reveal a 15.0k job gain in April after the 60.9k surge in March. The unemployment rate is projected at 5.9%, matching the 5.9% in March. The wage price index for Q1 (Wednesday) is projected to expand 0.4% in Q1 (q/q, sa) after the 0.5% rise in Q4. That would leave the annual growth rate at 1.8% versus the 1.9% pace in Q4 and Q3 that were the slowest since the great recession. The measure peaked at a 4.3% y/y growth rate in Q2 of 2008.The minutes to the Reserve Bank of Australia’s May meeting will be released on Tuesday.

New Zealand: New Zealand’s calendar has both Q1 PPI input and Q1 PPI output will be released on Tuesday. There is nothing from the Reserve Bank of New Zealand this week. Last week saw the Bank hold rates steady at 1.75%, as expected, but leave a dovish tone in place amid the “numerous uncertainties” that remain. A somewhat more balanced outlook was anticipated from the Bank.

Click here to access the HotForex Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! The next webinar will start in:

Andria Pichidi

Market Analyst


Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.