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

DateTimeCurrencyEventForecastPrevious
02-May00:15USDFOMC Member Dudley Speaks  
 00:30AUDAIG Manufacturing Index 58.1
 02:00AUDMI Inflation Gauge m/m 0.00%
 02:30AUDNAB Business Confidence 6
 03:00JPYFinal Manufacturing PMI4848
 07:30AUDCommodity Prices y/y -15.40%
 08:15CHFRetail Sales y/y0.30%-0.20%
  EURSpanish Manufacturing PMI5353.4
 08:30CHFManufacturing PMI53.653.2
 08:45EURItalian Manufacturing PMI54.153.5
 08:50EURFrench Final Manufacturing PMI48.348.3
 08:55EURGerman Final Manufacturing PMI51.951.9
 09:00EURFinal Manufacturing PMI51.551.5
 10:30EURGerman Buba President Weidmann Speaks  
 14:30CADRBC Manufacturing PMI 51.5
 14:45USDFinal Manufacturing PMI5150.8
 15:00EURECB President Draghi Speaks  
  USDISM Manufacturing PMI51.651.8
  USDConstruction Spending m/m0.50%-0.50%
  USDISM Manufacturing Prices5151.5
 17:30CHFSNB Chairman Jordan Speaks  
03-May02:30AUDBuilding Approvals m/m-1.80%3.10%
 02:45CNYCaixin Manufacturing PMI49.849.7
 05:30AUDCash Rate2.00%2.00%
  AUDRBA Rate Statement  
 09:30GBPManufacturing PMI51.351
 10:00EURPPI m/m0.10%-0.70%
 10:30AUDAnnual Budget Release  
 15:30USDFOMC Member Mester Speaks  
 17:30CADBOC Gov Poloz Speaks  
 23:45NZDEmployment Change q/q0.60%0.90%
  NZDUnemployment Rate5.50%5.30%
  NZDLabor Cost Index q/q0.30%0.40%
04-May00:01GBPBRC Shop Price Index y/y -1.70%
 00:30AUDAIG Services Index 49.5
 02:00NZDANZ Commodity Prices m/m -1.30%
 07:45EURFrench Trade Balance-4.2B-5.2B
 08:00EURSpanish Unemployment Change-86.6K-58.2K
 08:15EURSpanish Services PMI55.155.3
 08:45EURItalian Services PMI51.351.2
 08:50EURFrench Final Services PMI50.850.8
 08:55EURGerman Final Services PMI50.554.6
 09:00EURFinal Services PMI53.353.2
 09:30GBPConstruction PMI54.154.2
 10:00EURRetail Sales m/m0.10%0.20%
 13:15USDADP Non-Farm Employment Change205K200K
 13:30CADTrade Balance-1.2B-1.9B
  USDPrelim Nonfarm Productivity q/q-1.30%-2.20%
  USDPrelim Unit Labor Costs q/q2.90%3.30%
  USDTrade Balance-45.6B-47.1B
 14:45USDFinal Services PMI52.152.1
 15:00USDISM Non-Manufacturing PMI54.954.5
  USDFactory Orders m/m0.70%-1.70%
 15:30USDCrude Oil Inventories 2.0M
05-May02:00AUDHIA New Home Sales m/m -5.30%
 02:30AUDRetail Sales m/m0.30%0.00%
  AUDTrade Balance-2.95B-3.41B
 02:45CNYCaixin Services PMI52.652.2
 08:30GBPHalifax HPI m/m0.10%2.60%
 09:00EURECB Economic Bulletin  
 09:10EURRetail PMI 49.2
 09:30GBPServices PMI53.653.7
 12:30USDChallenger Job Cuts y/y 31.70%
 13:30CADBuilding Permits m/m 15.50%
  USDUnemployment Claims261K257K
 16:30USDFOMC Member Bullard Speaks  
06-May00:15USDFOMC Member Bullard Speaks  
 00:30AUDAIG Construction Index 45.2
 00:50JPYMonetary Base y/y29.30%28.50%
 02:30AUDRBA Monetary Policy Statement  
 08:00CHFForeign Currency Reserves 576B
 13:30CADEmployment Change0.2K40.6K
  CADUnemployment Rate7.20%7.10%
  USDAverage Hourly Earnings m/m0.30%0.30%
  USDNon-Farm Employment Change206K215K
  USDUnemployment Rate5.00%5.00%
 15:00CADIvey PMI 50.1
 20:00USDConsumer Credit m/m16.1B17.2B

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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