Forex Weekly Outlook May 11-15

Forex markets have seen a turbulent week, in which the USD suffered but managed to partially recover. German GDP, UK Employment data, Mark Carney’s speech and US consumer data stand out. These are the major events on forex calendar. Join us as we explore this week’s highlights.

The Non-Farm Payrolls release showed the U.S. economy created 223,000 jobs in April, rebounding from a poor jobs gain in March. The details of the report are mixed, but there are slightly more positives than negatives. The euro jumped yo highs last seen in February on a short squeeze but retreated. In the UK, the Conservatives won an absolute majority, the best outcome for markets, and the pound jumped on this surprise. The Australian dollar suffered a rate cut but also no further cuts anytime soon and the reaction was positive for AUD/USD. The loonie made some nice gains with oil, but found it hard to maintain them. Let’s start:

1. UK rate decision: Monday, 11:00. The Bank of England maintained its benchmark borrowing rate at a record low of 0.50% on April, following weaker than expected inflation. Britain’s economy prospered in 2014 with an annual growth of 3%. Despite a slow start of 2015 growth is expected to pick-up in the coming months and the sudden fall in inflation is mostly associated to the global slump in oil prices. The BoE forecasts a 2% inflation in two years’ time. The Central Bank also kept the 375 billion of government bonds to further boost the UK economy. No change in rates is expected this time.
2. Graeme Wheeler speaks: Tuesday, 22:45. RBNZ Governor Graeme Wheeler will hold a press conference in Wellington following the release of the Financial Stability Report. In the last monetary policy meeting Wheeler said uncertainties exist in Europe, China and Australia, although global growth should be boosted by the decline in world oil prices. He also said that New Zealand economy continues to expand at an annual rate of around 3%, supported by low interest rates, high net immigration and construction activity, and the fall in fuel prices.
3. German GDP: Wednesday, 6:00. Germany’s economy expanded more than expected in the fourth quarter of 2014. GDP grew by 0.7% thanks to a boost in domestic demand. Analysts expected a lower expansion rate of 0.3%. Europe’s economic leader continued to expand as lower inflation increased demand and wages kept growing at a healthy pace of 2.8% in 2014. Furthermore, since interest rates on deposits were approaching the negative territory, people saw no reason to save. GDP growth is expected to reach 0.5%.
4. UK employment data: Wednesday, 8:30. U.K. jobless claims fell to the lowest level in forty falling 20,700 in March to 772,400, the lowest since 1975. Wage growth is strongly felt due to Zero inflation. Household income is expected to be robust in 2015. Annual pay growth excluding bonuses accelerated from 1.6%. In In February alone, wages rose 2.2% from a year earlier, following 1.6% in January, the biggest increase since 2011. The number of available jobs edged up to 743,000 in the first quarter, the highest since comparable records began in 2001. The number of Jobless claims is expected to drop 20,100.
5. Mark Carney talks: Wednesday, 9:30. BOE Governor Mark Carney will speak in London about the Inflation Report. Carney said policymakers shouldn’t fight the current period of low inflation by inserting stimulus into the economy, since this fall is temporary and related to the oil price crush.
6. US Retail sales: Wednesday, 12:30. Retail sales edged up in March for the first time since November rising 0.9% compared to a 0.6% decline in the prior month. Economists expected and even higher rise of 1.1%. Consumers increased purchases of automobiles and other goods, suggesting the slowdown in the first quarter was temporary. Meanwhile, core retail sales, excluding automobiles, increased by a seasonally adjusted 0.4% in March, a bit weaker than the 0.6% forecasted. Analysts expect retail sales to rise 0.3% and core sales to climb 0.4%.
7. US PPI: Thursday, 12:30. U.S. producer prices increased in March 0.2% following four months of declines indicating signs of firming in underlying inflation. Analysts forecasted PPI to reach 0.3% after falling 0.5% in February. Energy prices have stabilized, but weak global demand may to keep inflation subdued for a longer period. Due to low inflation levels, most analysts reduced their expectations for a Fed rate hike. Producer prices are predicted to rise 0.1% in April.
8. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits increased last week by a mere 3,000 last week to 265,000, reaffirming the positive trend in the US labor market. The encouraging employment figures continue to improve despite a temporary decline in growth. Analysts expected claims to reach 277,000. The four-week moving average of claims, fell 4,250 to 279,500, the lowest since May 2000. The number of new unemployment claims is forecasted to reach 271,000.
9. US Prelim UoM Consumer Sentiment: Friday, 14:00. US consumer confidence edged up in April to 95.9 from 93 after two months of declines. Economists forecasted a minor rise to 93.8. Since growth is expected to increase in the second quarter, Consumer sentiment and consumer spending will follow suit. Consumer sentiment is forecasted to rise further to 96.5 this time.

*All times are GMT.

That’s it for the major events this week. Stay tuned for coverage on specific currencies