Forex Minute Trade Plan – Fundamental Insights 01/05/2014

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Forex Minute Trade Plan - Fundamental Insights 28/04/2014

Here’s a look at the day’s key fundamental releases, and their likely impact on the global currency markets.

US ISM Manufacturing PMI

The day’s headliner is the latest ISM manufacturing purchase managers’ index report. The data is compiled from a survey of about 400 purchasing executives across a range of industries, and offers insight into those companies’ outlook on the future of the US economy. Due to their “front line” nature, purchasing managers are generally the first to respond to changing business conditions. For this reason, their actions, and the opinions that support them, can serve as a leading indicator of actual economic conditions.

A release above 50.0 indicates industry expansion, which through a chain of economic stimuli including employment, consumption and inflation, leads to a rise in interest rates. Conversely, a release below 50.0 suggests contraction, which hints at dovish monetary policy. Consensus forecasts the release at 54.3, so look for a downside miss to weaken the US dollar and an upside surprise to strengthen the greenback.

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Japanese Household Spending

The next big release is the latest Japanese household spending figure. The Japanese economy has been very much in the spotlight as late, with Shinzo Abe’s “three arrow” policy well under way and expected by many to start producing results. One of Abe’s key goals is to avoid deflation, and household spending is a strong leading indicator of whether or not this is a reality. In addition, a sales tax hike implemented at the beginning of this month has analysts worrying that any stimulatory measures may be offset by a decrease in real disposable income.

Consensus forecasts the release at 1.0% growth, versus a previous release of -2.5%, so look for growth of more than 1.0% to boost the Japanese yen versus its major counterparts. Conversely, look for a release below 1.0% to weaken the currency.

To contact the reporter of this story: Samuel Rae at Samuel@forexminute.com