Forex Major Currencies Outlook (June 1 – June 5)

USD 

Second estimate of Q1 GDP came in at -5% vs down from -4.8% that preliminary reading showed. Private consumption improved compared to the preliminary reading but the gross private fixed investment came in much worse than preliminary reported. Initial jobless claims for the week ending May 23 came in at 2123k which puts total amount of jobless claims from mid-March to almost 41 million. This is the tenth week of claims above 2 million per week. Analysts are expecting weekly jobless claims to remain above 1 million through at least June. Continuing claims have fallen for the first time since the virus outbreak and although they reached devastating 21 million people it shows a glimmer of hope before next week’s NFP report. 

PCE for April came in at 0.5% y/y while core PCE slipped to 1% y/y. Personal spending continued to plunge and came in at -13.6%. An interesting reading is personal income which rose 10.5%. The increase is achieved due to unemployment benefits that were designed to put income received to the national average level. However, due to the fact that great majority of laid-off workers were earning considerably less than average wages, it has led to them being better paid than if they were working. Unemployment benefits will be paid until July 31. 

This week we will have PMI data from ISM, trade balance data and NFP report on Friday. Expectations are for drop of a bit below 5 million with the unemployment rate shooting to almost 20%. 

Important news for USD: 

Monday:

• ISM Manufacturing PMI

Wednesday:

• ISM Non-Manufacturing PMI

Thursday:

• Trade Balance

Friday:

• Nonfarm Payrolls
• Unemployment Rate 

EUR 

German Ifo data for May showed a rebound from April data. The hope for a recovery is based on gradual lifting of lockdown. Germany reportedly wants to support medium-sized companies that have less than 250 employees by paying them up to €50 000 per month from the period of June to December. In order to be eligible for assistance, a company should have recorded at least a 60% y/y drop in sales for the months of April and May, meaning those companies that were hardest hit by the virus impact. Economic sentiment in May showed a small improvement compared to April readings, however services sentiment dropped further down shattering hopes of fast recovery. 

European Commission is reportedly said to propose €750bn virus recovery fund as a means of aid member states. It is said that €500bn will be in grants and €250bn will be in loans. Italy is set to receive €82bn in grants, Spain €77bn while France will get €39bn. Additionally, Italy will get €91 bn in loans while Spain will be getting €63bn in loans. Initial market reaction was very favourable, pushing EURUSD over 1.10 mark and reaching 1.11 on Friday. Preliminary May inflation came in at 0.1% y/y for the lowest reading in the past four years. A small comfort can be found in core inflation, which held steady at 0.9% y/y. The inflation data are taking the back seat due to the markets focus on virus related data, however once that settles inflation data will gain in importance. 

This week we will have final May PMI data, consumption data and ECB rate decision. Expectations are for ECB to ramp up their PEPP (Pandemic Emergency Purchase Programme) by €500bn and prolong it for at least a year. 

Important news for EUR: 

Monday:

• Markit Manufacturing PMI (EU, Germany, France)

Wednesday:

• Markit Services PMI (EU, Germany, France)
• Markit Composite PMI (EU, Germany, France)

Thursday:

• Retail Sales
• ECB Interest Rate Decision
• ECB Monetary Policy Press Conference 

GBP 

Brexit talks continued throughout the week. EU seemed prepared to ease their “maximalist approach” on fishing rights, thus making first concession in negotiations. There is still a long road ahead but this may be interpreted as a first step in the right direction. Special adviser to the Prime Minister, Dominic Cummings, violated the lockdown rules which he helped devise. This is causing PM’s approval ratings to decline and some members of Tory party are calling for Cummings’ resignation. There is also a turmoil among common people. If they see Cummings’ act as one set of rules that apply for the elite and the other set of rules for all the rest it can lead to more and more people breaking the rules thus slowing the return to normal. 

This week we will have final May PMI data and since we are entering June we can expect trade negotiations between the UK and EU to intensify. June 30 is the deadline when Britain must decide whether it wants an extension to the transition period. If not, a no-deal Brexit at the end of the year becomes the default. 

Important news for GBP: 

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI 

AUD 

RBA Governor Lowe stated his satisfaction with the introduced economic package. The bank will keep its expansionary monetary policy until progress is made towards full employment and they are confident on inflation. Current cash rate of 0.25% is effectively the lowest it can go and negative rates are extraordinary unlikely. Rates will stay this low for years to come and bigger role of fiscal policy is needed. 

Private capital expenditure for Q1 came in at -1.6% q/q beating both the expectations and the previous quarter which was at -2.8% q/q. Estimates for Q2 are much more bleak. AUD was the second biggest beneficiary of the risk-on mood in the markets with AUDUSD shooting up to 0.66559 where its advance was capped by 200 DMA. 

This week from Australia we will have trade balance and consumption data, as well as RBA meeting which is expected to be a tnon-event while Q1 GDP has potential to move the markets. Caixin PMI data along with trade balance data will come from China. 

Important news for AUD: 

Monday:

• Caixin Manufacturing PMI (China)

Tuesday:

• RBA Interest Rate Decision
• RBA Rate Statement

Wednesday:

• GDP
• Caixin Services PMI (China)
• Caixin Composite PMI (China)

Thursday:

• Trade Balance
• Retail Sales

Sunday:

• Trade Balance (China) 

NZD 

Trade balance in April came in at NZD1267mn for a largest monthly surplus on record. This was achieved on the back of plunging imports which came in at NZD3.99bn, down from NZD5.14bn the previous month. Exports also dropped, not as dramatically as imports, due to the lockdown caused by the virus outbreak and stoppage in the economy. Business confidence in May improved to -41.8 vs -66.6 the previous month with activity outlook also improving. NZD was the biggest beneficiary of the risk-on mood in the markets with NZDUSD shooting up to 0.62100 level with some analyst seeing it rise to 0.64 in the coming months. Currently its rise is capped by 100 DMA. 

CAD 

Q1 GDP came in at -8.2%, a significant drop from 0.3% in Q4 of 2019. The reading is a biggest drop since Q1 of 2009 and household spending with -2.3% is the worst quarter reading ever. These historical lows will quickly be surpassed as Q2 is expected to show even bigger drops. Prime Minister Trudeau considers scaling back on some relief programs as the economy re-opens. 

This week we will have BOC meeting, trade balance and employment data. This will be the first BOC meeting presided by new governor Macklem so his views on policy will garner more attention. 

Important news for CAD: 

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement

Thursday:

• Trade Balance

Friday:

• Employment Change
• Unemployment Rate 

JPY 

Tokyo area inflation for the month of May came in at 0.4% y/y, ex fresh food category came in at 0.2% y/y while ex fresh food, energy category came in at 0.5% y/y. There are beatings on both expectations and previous month’s reading, however there is little place for joy since numbers are miles away from the target of 2%. April unemployment rate ticked to 2.6%. Preliminary industrial production for April plunged to -9.7% m/m and -14.4% y/y. The decline was led by -33% m/m drop in auto production, the biggest drop since 2013. Waning global demand is shattering the auto industry. Retail sales added to the horrific data dropping -9.6% m/m and -13.7 y/y for the biggest year on year drop in more than two decades. 

Prime minister Abe has announced nationwide lifting of state of emergency. He added that plan is for introduction of contract tracing app in the mid-June. If the number of virus infections rise government will consider reimposing state of emergency. Government has announced new stimulus package that will amount to JPY117 trillion.

This week we will have final May PMI data as well as data on household spending.

Important news for JPY:

Monday:

• Markit Manufacturing PMI

Wednesday:

• Markit Services PMI
• Markit Composite PMI

Friday:

• Household Spending

CHF

Total sight deposits for the week ending May 22 continued to climb and are now at CHF679.9bn vs CHF673.5bn the previous week. Prevailing risk appetite in the previous week assisted them in pushing EURCHF to test 1.06 level. European Commission stimulus gave boost to EUR making EURCHF shoot to 1.07 level which may ease SNB’s intervention in the markets. SNB Chief Jordan reiterated their willingness to intervene more strongly if the need arises. Trade balance in April came in at CHF4.04bn, up from downwardly revised CHF3.96bn the previous month. Both exports (-10%) and imports (-17.8%) completely plunged amid virus peak.

This week we will have consumption and inflation data along with Q1 GDP.

Important news for CHF:

Tuesday:

• Retail Sales

Wednesday:

• GDP

Thursday:

• CPI

_{You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT+3 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.}

_{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.}