Forex Major Currencies Outlook (Apr 27 – May 1)

USD 

Sales of existing homes in March dropped almost 10% to 5.27m from 5.76 the previous month while new home sales plunged over 15% to 627k from 741k the previous month. Initial jobless claims for the week ending April 18 came in at 4427k down from 5245k the previous week. This is the third week of falling claims, however the number is still preposterous as almost 4.5 million people asked for monetary assistance. Continuing jobless claims rose to almost 16 million. 

The US Senate approved a $485bn support package that includes around $320bn for the Payroll Protection Plan that turns loans into grants for small and medium businesses that maintain or rehire employees. The remainder of the funds is intended for coronavirus testing and hospitals. The House has also approved the package. Another support package that includes assistance for state and local government is currently being negotiated but it is still in the early stages. 

This week we will have preliminary Q1 GDP reading, PCE inflation and personal spending data, initial and continuing jobless claims as well as ISM manufacturing PMI data. Fed should stay dormant at their meeting and let their previous measures start to produce results. 

Important news for USD 

Wednesday:

• GDP
• Fed Interest Rate Decision
• FOMC Press Conference

Thursday:

• PCE
• Personal Spending
• Initial Jobless Claims

Friday:

• ISM Manufacturing PMI

EUR

ZEW survey of the current situation came in at -91.5 vs -77.5 as expected. Expectations for both EU and Germany surprised and came in positive, 25.2 and 28.2 respectively, however those expectations are not for the short-term. Bounce back in the economy is not expected before Q3.

PMI numbers for April were downright abysmal. Expectations were very low but the readings managed to come way below expectations, particularly services PMI. Manufacturing PMI for Eurozone came in at 33.6 vs 38 as expected while services plunged to only 11.7 vs 22.8 as expected dragging the composite reading to 13.5 vs 25 as expected. French services PMI came in almost single digit at 10.5. The survey was done for the period of 7 – 21 April, right in the middle of lockdowns thus it shows the full devastation that the virus has brought on economic activity. Markit stated: "Our model which compares the PMI with GDP suggests that the April survey is indicative of the eurozone economy contracting at a quarterly rate of approximately 7.5%.” They added that the fall in the employment is among steepest ever.

This week we will have business sentiment indicators, preliminary Q1 and CPI for April readings as well as ECB meeting.

Important news for EUR:

Wednesday:

• Business Climate Indicator
• Consumer Confidence Index

Thursday:

• GDP
• CPI
• ECB Interest Rate Decision
• ECB Monetary Press Conference

GBP

Employment report for March showed a claimant count change of only 12.2k, indicating a not so bleak picture in the jobs market. The government has offered a program to keep people at work and almost 150 000 companies applied for it to receive a partial salary funding for almost 1 million workers in the first day of program’s introduction. This program helped to offset the spike in claimant counts. The unemployment rate ticked to 4% while average weekly earnings slipped to 2.8% 3m/y from 3.1% 3m/y the previous month.

CPI for March came in at 1.5% y/y as expected, down from 1.7% y/y the previous month due to the drop in oil prices. Core CPI came in at 1.6% y/y as expected. Retail sales plunged -5.1% m/m vs -0.3% m/m the previous month. Retail sales ex-autos and fuel dropped -3.8% m/m. Apart from food purchases, which due to virus-induced stockpiling pushed the reading up, all other categories showed significant drops. The greatest drop was seen in clothing stores where sales were down over a third.

Preliminary PMI numbers followed the suit of the European data and came in at 32.9 for manufacturing, 12.3 for services and 12.9 for composite. Easily record low numbers in survey’s 22-year history. According to the report, an estimated 81% of service providers and 75% of manufacturing companies reported a fall in business conditions during the month. PMI numbers indicate that we can expect a drop in Q2 GDP greater than 7%.

AUD

RBA April minutes showed board’s expectations that coordinated monetary and fiscal responses would soften expected economic contraction. They expect that less frequent and smaller purchases of government bonds will be required going on. Governor Lowe reiterated that current rates will likely remain for a few years.

Central bank of China cut its one-year Loan Prime Rate (LPR) by 20 bps to 3.85%. The central bank also cut the five-year LPR by 10 bps to 4.65%. These cuts are intended to ease lending conditions and stimulate the economy.

This week we will have inflation data from Australia and official PMI numbers from China.

Important news for AUD:

Wednesday:

• CPI

Thursday:

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

NZD

Inflation data for Q1 showed CPI at 0.8% q/q vs 0.4% q/q as expected and 2.5% y/y vs 2.1% y/y as expected. Inflation has shot over the magical level of 2%, but the data captures pre-virus conditions so it is brushed for now. GDT price auction return into negative territory coming in at -4.2%. Prime Minister Ardern announced that they will be easing lockdown measures on April 27.

This week we will have trade balance and business confidence data.

Important news for NZD:

Wednesday:

• Trade Balance

Thursday:

• ANZ Business Confidence

CAD

Retail sales in March came in at 0.3% m/m vs 0.4% m/m the previous month while the ex-autos category came in flat vs -0.1% m/m the previous month. Sales rose in 6 of 11 sub-sectors, representing 62.5% of retail trade. CPI in March crumbled down to 0.9% y/y from 2.2% y/y the previous month due to the collapse in oil prices. Gasoline was down -21.2%. This is the lowest inflation reading since September of 2016. Core measures also came weaker than expected with median coming at 2% y/y, common at 1.7% y/y and trim at 1.8% y/y.

JPY

Trade balance for March came in at JPY4.9bn vs JPY459.9bn as expected. A very big miss was caused by exports slumping -11.7% y/y, which represents 16 consecutive negative y/y readings, while imports fell -5% vs -8.7% as expected. Exports to the US are down -16.5% y/y, to EU they are down -11.1% y/y and to China exports are down -8.7% y/y. Auto exports have fallen more than 13%. National CPI numbers came in as expected with both headline and ex-fresh food readings at 0.4% y/y and ex-food and energy at 0.6% y/y.

Preliminary April manufacturing PMI slipped to 43.7 from 44.8 the previous month while services PMI plunged to 22.8 from 33.8 the previous month. This is a new record low for the services reading. Composite PMI was dragged down to 27.8 from 36.2 the previous month. Markit concludes that we can expect a larger than 10% annual drop in GDP for Q2.

This week we will have employment, consumption, industrial production and Tokyo inflation data. BOJ meeting will leave the rate unchanged but further easing of monetary policy is possible.

Important news for JPY:

Tuesday:

• BOJ Interest Rate Decision
• BOJ Monetary Policy Statement
• Unemployment Rate

Thursday:

• Retail Sales
• Industrial Production

Friday:

• Tokyo CPI

CHF

Total sight deposits for the week ending April 17 came in at CHF637.2bn vs CHF634.1bn the week before. SNB continues to fight Swissy’s strength not paying much attention about being labelled as a currency manipulator. Trade balance in March came in at CHF4.02bn vs CHF3.54bn the previous month. Increase in surplus was achieved in the worst possible way with both falling exports -4% and falling imports -6.7%.

This week we will have consumption data.

Important news for CHF:

Thursday:

• Retail Sales

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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.}