Forex Weekly Outlook – May 8-12 2017

The US dollar was doing well against commodity currencies but mixed against the majors. The upcoming week begins with the echoes from the French elections and the NFP. It then continues with a rate decision in the UK and then top-tier data from the US: inflation and retail sales. Here is an outlook for the main events of the week.

The US jobs report was mixed again, this time with a strong gain in jobs, 211K, while wages retreated to 2.5% y/y. Before the report, the Fed shrugged off the recent slowdown and saw the slowdown as transitory. Macron is likely to be the next French president, providing a relief for markets, while the UK campaign is heating up after clashes with the EU over Brexit. Oil prices and other commodities tumbled down, weighing heavily on commodity currencies. What will the second week of May bring? Let’s start:

Updates:

  1. French elections round 2: Sunday, exit polls are at 18:00 GMT and real results will trickle around the market open. In the televised debate, Macron remained calm and Le Pen was quite unpresidential according to observers. The result in the opinion polls was favorable to the centrist, diminishing the talk of an erosion in his popularity. If the polls are as correct as they were in the first round, Macron is set for a landslide victory with 62%. This will encourage markets about the upcoming parliamentary elections, giving Macron a potential majority that will enable reforms. A victory with less than 60% could cause worry, but still prevent the biggest danger of a Le Pen presidency. If she shocks the world and emerges as a winner against all odds, the euro is set to collapse below parity with the dollar. Le Pen wants France to leave the euro-zone and there is no euro without France. Follow French elections – all the updates in one place[1]
  2. US JOLTS Job Openings: Tuesday, 14:00. The number of job openings is watched by the Federal Reserve for long-term trends. While the Fed makes the report important, it is a bit lagging. We now get the information for March. Expectations stand at 5.67 million annualized after 5.74 in February. The recent NFP was for March.
  3. Crude Oil Inventories: Wednesday, 14:30. With the collapse in the price of the black gold, the publication gains higher importance. A drop of 0.9 million barrels was seen last week. Apart from the change in crude barrels, watch out for total US production, which is on the rise.
  4. New Zealand rate decision: Wednesday, 21:00. The Reserve Bank of New Zealand is expected to leave the interest rate unchanged at 1.7% once again. While employment is on the rise, inflation remains subdued. The bigger question will be about the exchange rate. Will Governor Wheeler talk the down or show some satisfaction with the recent drop? Note that RBNZ holds a press conference at 22:00 and the governor also speaks later, at 1:00.
  5. Bill Dudley speaks: Wednesday 10:25. Dudley is the President of the New York Fed and considered No. 3 at the organization. As a known dove, Dudley’s surprisingly hawkish comments in March set the stage for the rate hike. Is he still happy after the recent data?
  6. UK rate decision (Super Thursday): Thursday: 11:00. The event is dubbed “Super” as the Bank of England also publishes its quarterly inflation report. These meetings have been opportunities to lay out new monetary policy announcements. With weaker growth and slowing wages, the BOE might be more cautious. The recent rise in sterling alleviates some inflationary pressures. Mark Carney and his colleagues might also be more cautious on communications as the event is held exactly four weeks ahead of the general elections in the UK.
  7. US PPI: Thursday, 12:30. Producer prices eventually feed into consumer ones. Headline PPI dropped by 0.1% in March and is expected to bounce back with 0.2% in April. Core PPI was flat and is projected to move 0.2% to the upside.
  8. US jobless claims: Thursday, 12:30. The weekly barometer of the jobs market came out better than expected last week: 238K, a return to the lower end. A small rise to 245K is on the cards.
  9. German GDP: Friday, 6:00. The biggest economy in the euro-zone posted a weaker than expected grwoth level in Q4 2016: 0.4%. An acceleration is expected now: 0.6%. This will impact the assessment of the euro-zone GDP, which came out at 0.5% in the preliminary read.
  10. US retail sales: Friday, 12:30. The US economy leans heavily towards consumption, making the publication a top-tier one. March was a bit disappointing with a headline drop of 0.2%. A bounce back with 0.6% is on the cards. Core retail sales were flat and now carry expectations for a rise of 0.5%.
  11. US CPI: Friday, 12:30. Inflation in the US is not going anywhere fast. Headline CPI that was fueled by fuel, surprised with a drop of 0.2% in March. A rise of the same scale is forecast now. Core CPI which is even more important, dropped by 0.1%. A rise of 0.2% is estimated now.
  12. US Consumer Sentiment: Friday, 14:00. Last but not least, this early assessment of the mood of consumer has the last word for the week. The final score for April stood at 97 points and markets are expecting a repeat of this number now. Note that the actual correlation between confidence and consumption is not always too good.

* All times are GMT

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