Weekly Forex Preview: Manufacturing PMI to start the week

May 02, 5:35 am

The US dollar saw another week of strong declines with the Fed leaving monetary policy unchanged and economic data from the US showing a weaker pace of growth in the first quarter, with the GDP rising 0.50%. Monthly economic data was also weak with durable goods orders showing a lesser than expected pace of growth. Only next to the US dollar was the Australian dollar which weakened significantly on a risk aversion mode as well as ahead of the RBA’s monetary policy decision next week.

Weekly Spot FX Performance – 29/04/2016 (Source: Finviz.com)
Weekly Spot FX Performance – 29/04/2016 (Source: Finviz.com)

The yen emerged on the tops this week as the Bank of Japan left monetary policy unchanged, surprising many who expected the central bank to unleash a host of monetary policy tools to weaken the yen. The inaction led to the yen being bid up, gaining over 5% on the week. USDJPY along fell over 4.50% for the week and by late Friday, the euro also managed to make up for the lost ground, rising back above the $1.4 handle.

Fundamentals for the Week 02/05 – 06/05

Date Time Currency Event Forecast Previous
02-May 00:15 USD FOMC Member Dudley Speaks    
  00:30 AUD AIG Manufacturing Index   58.1
  02:00 AUD MI Inflation Gauge m/m   0.00%
  02:30 AUD NAB Business Confidence   6
  03:00 JPY Final Manufacturing PMI 48 48
  07:30 AUD Commodity Prices y/y   -15.40%
  08:15 CHF Retail Sales y/y 0.30% -0.20%
    EUR Spanish Manufacturing PMI 53 53.4
  08:30 CHF Manufacturing PMI 53.6 53.2
  08:45 EUR Italian Manufacturing PMI 54.1 53.5
  08:50 EUR French Final Manufacturing PMI 48.3 48.3
  08:55 EUR German Final Manufacturing PMI 51.9 51.9
  09:00 EUR Final Manufacturing PMI 51.5 51.5
  10:30 EUR German Buba President Weidmann Speaks    
  14:30 CAD RBC Manufacturing PMI   51.5
  14:45 USD Final Manufacturing PMI 51 50.8
  15:00 EUR ECB President Draghi Speaks    
    USD ISM Manufacturing PMI 51.6 51.8
    USD Construction Spending m/m 0.50% -0.50%
    USD ISM Manufacturing Prices 51 51.5
  17:30 CHF SNB Chairman Jordan Speaks    
03-May 02:30 AUD Building Approvals m/m -1.80% 3.10%
  02:45 CNY Caixin Manufacturing PMI 49.8 49.7
  05:30 AUD Cash Rate 2.00% 2.00%
    AUD RBA Rate Statement    
  09:30 GBP Manufacturing PMI 51.3 51
  10:00 EUR PPI m/m 0.10% -0.70%
  10:30 AUD Annual Budget Release    
  15:30 USD FOMC Member Mester Speaks    
  17:30 CAD BOC Gov Poloz Speaks    
  23:45 NZD Employment Change q/q 0.60% 0.90%
    NZD Unemployment Rate 5.50% 5.30%
    NZD Labor Cost Index q/q 0.30% 0.40%
04-May 00:01 GBP BRC Shop Price Index y/y   -1.70%
  00:30 AUD AIG Services Index   49.5
  02:00 NZD ANZ Commodity Prices m/m   -1.30%
  07:45 EUR French Trade Balance -4.2B -5.2B
  08:00 EUR Spanish Unemployment Change -86.6K -58.2K
  08:15 EUR Spanish Services PMI 55.1 55.3
  08:45 EUR Italian Services PMI 51.3 51.2
  08:50 EUR French Final Services PMI 50.8 50.8
  08:55 EUR German Final Services PMI 50.5 54.6
  09:00 EUR Final Services PMI 53.3 53.2
  09:30 GBP Construction PMI 54.1 54.2
  10:00 EUR Retail Sales m/m 0.10% 0.20%
  13:15 USD ADP Non-Farm Employment Change 205K 200K
  13:30 CAD Trade Balance -1.2B -1.9B
    USD Prelim Nonfarm Productivity q/q -1.30% -2.20%
    USD Prelim Unit Labor Costs q/q 2.90% 3.30%
    USD Trade Balance -45.6B -47.1B
  14:45 USD Final Services PMI 52.1 52.1
  15:00 USD ISM Non-Manufacturing PMI 54.9 54.5
    USD Factory Orders m/m 0.70% -1.70%
  15:30 USD Crude Oil Inventories   2.0M
05-May 02:00 AUD HIA New Home Sales m/m   -5.30%
  02:30 AUD Retail Sales m/m 0.30% 0.00%
    AUD Trade Balance -2.95B -3.41B
  02:45 CNY Caixin Services PMI 52.6 52.2
  08:30 GBP Halifax HPI m/m 0.10% 2.60%
  09:00 EUR ECB Economic Bulletin    
  09:10 EUR Retail PMI   49.2
  09:30 GBP Services PMI 53.6 53.7
  12:30 USD Challenger Job Cuts y/y   31.70%
  13:30 CAD Building Permits m/m   15.50%
    USD Unemployment Claims 261K 257K
  16:30 USD FOMC Member Bullard Speaks    
06-May 00:15 USD FOMC Member Bullard Speaks    
  00:30 AUD AIG Construction Index   45.2
  00:50 JPY Monetary Base y/y 29.30% 28.50%
  02:30 AUD RBA Monetary Policy Statement    
  08:00 CHF Foreign Currency Reserves   576B
  13:30 CAD Employment Change 0.2K 40.6K
    CAD Unemployment Rate 7.20% 7.10%
    USD Average Hourly Earnings m/m 0.30% 0.30%
    USD Non-Farm Employment Change 206K 215K
    USD Unemployment Rate 5.00% 5.00%
  15:00 CAD Ivey PMI   50.1
  20:00 USD Consumer Credit m/m 16.1B 17.2B

Time: GMT+1

Currencies/Events to Watch this Week

AUD: It is a busy week for the Australian dollar with key economic data lined up over the week. Although starting off softly on Monday, the RBA monetary policy meeting is up on Tuesday. Despite last week’s quarterly inflation fall 0.20%, the RBA is widely expected to hold rates steady at this week’s meeting and will likely take a call in June if inflation continues to fall further. Building approvals and retail sales data make up the remainder of the data with expectations that Australian retail sales increased 0.30% in March.

NZD: Following the RBNZ’s decision to hold rates steady last week, the markets will focus on this week’s unemployment data. Reporting for the first quarter of 2016, New Zealand’s unemployment rate is expected to rise to 5.50% on the quarter up from 5.30% in Q4, 2015. However, hourly earnings report is expected to show an increase of 0.50%, up from 0.20% previously. Global dairy price index will also be coming out later in the week.

EUR: Economic data from the Eurozone will see the PMI data coming out over the week. Manufacturing PMI is expected to remain unchanged at 51.5, including services PMI expected to see no change at 53.2, same as in March. Retail sales data is due on Wednesday and is expected to show no change in March on a month over month basis, while retail sales on a year over year basis is expected to rise 2.60%.

GBP: The focus this week will be the manufacturing, construction and services PMI with mildly soft expectations. Manufacturing PMI is expected to rise by 2 points to 51.2 in April while construction PMI is expected to slip to 54, from 54.2 in March. Services PMI is also expected to come out weaker at 53.5, following March’s 53.7.

CAD: Economic data from Canada this week will see the building permits for the month of March, but focus will be on Friday’s jobs report. Canadian unemployment is expected to rise to 7.20% in April, following a 7.10% surprise decline in March. No change is expected on the net employment change. The data will be followed by the Canadian Ivey PMI.

USD: The week ahead will see the Fed members start with their speaking engagements with Dudley, Lockhart, Williams, Mester lined up for the week. On Monday, the ISM manufacturing index is due for release with expectations that manufacturing slipped to 51.5 in April, following March’s increase to 51.8. Construction spending is expected to show a gain of 0.40% for the month. On Wednesday, the ADP payrolls report is expected to show a 200k gain in monthly employment, while Friday’s nonfarm payrolls report is expected to show the US economy adding 205k jobs in April. The US unemployment rate is expected to stay put at 5.0%

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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