Forex forecast: key economic data to watch between May 11 - 16
The currencies market was relatively active this week as participants continued to focus on the coronavirus pandemic, a stream of weak economic data, and the developing tensions between the ECB and a German court.
Overall, the Australian dollar was the best-performing currency in the developed world, gaining by about 1.5 per cent against the euro. On the other hand, the euro declined due to weak economic data from Europe and the war of words between the ECB and the German court on the legality of quantitative easing.
Mexican peso and the Canadian dollar, also rose because of higher crude oil prices. Let us now look at the forex forecast for the coming week.
Australian dollar to remain in focus
As the best-performing currency in the developed world, players in the forex market will focus on the Aussie because of the expected economic data. On Tuesday, the National Bank of Australia (NAB) will release the business sentiment data. With the number of coronavirus cases falling and the country reopening, there is a possibility that the results will show some improvement.
On Wednesday, the Bureau of Statistics will release the wage price index data for the first quarter. Analysts polled by Reuters expect the wages to have risen by 2.1 per cent, which is 100 basis points below the fourth quarter’s 2.2 per cent growth.
Perhaps, the most important data will be the April’s industrial production data. A better-than-expected reading will likely push the Aussie higher because it will signal that there is demand for Australian goods. In this forex forecast, we expect the currency to be relatively strong in the coming week.
New Zealand dollar to react to RBNZ decision
The RBNZ will be the only major central bank to deliver its interest rates decision in the coming week. Analysts polled by Reuters expect the bank to leave rates unchanged, lower its economic projection, and commit to offer more support for the economy. By so doing, the central bank will be following the footsteps of the Bank of Japan (BOE), Bank of England (BOE), and the European Central Bank (ECB).
Additionally, the market will receive the manufacturing PMI data from Business NZ and the budget balance from New Zealand.
Euro to remain in spotlight
The biggest euro-related news this week was the ruling by a German court on the legality of QE. In response, the ECB committed itself to more asset purchases, claiming that it was only answerable to the European parliament. This war of words will likely continue.
Equally important, Eurostat will release the second preliminary GDP data from the eurozone. Analysts expect the data to show that the economy contracted by 3.8 per cent in the quarter. They also predict a double digits contraction in Q2. Other important data from Europe will be the French and German CPI, German GDP, and the April industrial production data.
Can the US dollar recover?
The US dollar index declined from the week’s high of 100.4 to a low of 99.27. This was partly contributed by the reopening of other international markets and the relatively weak jobs data from the US. In the coming week, there will be several important economic data that will drive the greenback’s performance. On Tuesday, the US will release the April CPI data and the Redbook data. These will be followed by mortgage and PPI data on Wednesday, On Thursday, the Labor Department will release another disappointing jobless claims data. Analysts expect that additional 2.7 million Americans filed for the claims.
Finally, on Friday, the US will release the April retail sales, industrial and manufacturing data, and consumer confidence numbers.
Forex forecast final thoughts
The volatility in the forex market will possibly start withering down in the coming week now that major central banks have delivered their decisions. Next week’s data will provide a guidance on what to expect in the upcoming central banks meetings.
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