Forex Weekly Outlook – Major economies continues to struggle With Havoc from Covid-19

Economic numbers remain soft, as the major economies have buckled under the paralysis caused by the Covid-19 pandemic. GDP and other first-quarter numbers point to significant economic contraction, as millions are without work and consumers have slashed spending.

The eurozone economy continues to struggle. France and Germany posted dismal numbers for first-quarter GDP. Germany’s economy fell by 2.2%, while French GDP plunged by 5.2 percent. German CPI fell by 0.1% in May, the first decline in four months. Eurozone CPI posted a weak gain of 0.1%, but core reading was much more robust, at 0..9 percent.

Inflation levels remain low in Japan. Bank of Japan Core CPI, the bank’s preferred inflation gauge, fell by 0.1% in March, the first decline since March 2017.

In the U.S., consumer confidence improved in May, as the CB consumer index came in at 86.6, up from 85.7 a month earlier. First-quarter GDP was revised downwards to -5.0%, compared to -4.8% in the initial estimate. Durable goods plunged in April, with the headline figure falling by 17.2% and the core reading falling by 7.2 percent. Unemployment claims continue to fall, with 2.12 million new claims last week. This was slightly higher than the forecast of 2.10 million and raises the total during Covid-19 to a staggering 41 million.

1. ISM Manufacturing PMI: Monday, 14:00. The index fell to 41.5 in April, down from 49.1 beforehand. The May data is also expected to indicate contraction, with an estimate of 43.5 points.
2. RBA Rate Decision: Tuesday, 5:30. After slashing the cash rate to 0.25%, the RBA hasn’t touched rates since March. No change is projected at the upcoming meeting. A dovish message in the rate statement could weigh on the Aussie.
3. Australian GDP: Wednesday, 1:30. GDP ticked up to 0.5% in Q4, up from 0.4% in the previous quarter. Analysts are bracing for a dismal first quarter, with a forecast of -0.4 percent.
4. BoC Rate Decision: Wednesday, 14:00. The Bank of Canada has kept rates close to zero, as the economy grapples with the financial crisis. Policymakers are expected to maintain the current rate of 0.25% at the upcoming meeting.
5. ISM Non-Manufacturing PMI: Wednesday, 14:00. The services sector has held up rather well; the April reading of 41.8 marked the first contraction in 2020. A slightly stronger reading is projected for April, with a forecast of 44.0 points.
6. ECB Rate Decision: Thursday, 11:45. Policymakers are expected to maintain interest rates at a flat 0.00%. Investors will be keenly interested in the rate statement, given the severe economic conditions gripping the eurozone.
7.  US Unemployment Claims: Thursday, 12:30. Unemployment claims have been falling, but the numbers remain staggering. Last week, 2.1 million new claims were made, and the upcoming reading could show a slight improvement if the recent trend continues.
8. US Employment Report: Friday, 12:30. Investors are braced for another month of soft data. The economy is expected to shed another 8.0 million jobs, after last the previous reading which indicated the loss of some 20.5 million jobs. Wage growth is expected to slip to 1.0%, down from 3.0% a month earlier. As well, the unemployment rate is expected to jump to 19.5%, compared to 14.7% in April.
9. Canadian Employment Report: Friday, 12:30. Job losses have hit staggering levels – the economy shed some 1.99 million jobs in April, reflective of poor economic conditions due to Covid-19.  However, this figure was far better than the estimate of a loss of 4.0 million jobs. Another huge decline is expected in May. The unemployment rate soared to 13.8% in April, up from 7.8% a month earlier. Another double-digit reading is expected for May.