Key Fundamental Factors this Week (4/20 – 4/24)

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Key Fundamental Factors this Week (4/20 - 4/24)

Last week, we had a slew of disappointing US fundamental data, which pressured the USD throughout the week. The greenback got a bit of relief on Friday with decent CPI and sentiment data. We also had the BoC and ECB. The BoC did give the CAD a boost as it became less dovish, but the ECB didn’t really change its tone, maintaining its course with QE. Let’s see what’s in store for us this week.

Monday (4/20)

NZ CPI q/q (Q1): -0.3%
Forecast: -0.2%
Previous: -0.2%
nz cpi 4/20
Disinflation in New Zealand is keeping a rate cut on the table for the Reserve Bank of New Zealand, which should keep the NZD/USD pressured and the AND/NZD choppy. If however, the CPI reading is flat or positive, we might see at least some short-term strength during the early part of the week, because traders might be pricing in a lower chance that the RBNZ will cut rates.

(Update: Inflation data came in negative and slightly worse than expected. The NZD/USD slid, but this was mainly a USD story and the greenback gained across the board. The NZD strong against the AUD, as the AUD/NZD faded from about 1.0140 to about 1.0115 after the CPI data).

Tuesday (4/21)

German ZEW Economic Sentiment (Apr.)
Forecast: 56.0
Previous: 54.8
german zew economic sentiment
(click to enlarge; source: forexfactory.com)
Eurzone ZEW Economic Sentiment (Apr.)
Forecast: 63.7
Previous: 62.4

While QE should keep the EUR pressured in the medium-term, it has been getting more resilient in the short-term as better data have been coming out as the ECB rolled out QE. Sentiment data should help the EUR/USD stay in consolidation or even give it a boost, especially with the USD giving back some gains after softer US data as of late.

CAN Wholesale Sales m/m
Previous:-3.1%
A rebound to a positive print should continue to help the CAD which recently got a boost especially after last week’s BoC meeting which concluded with a less dovish tone.

Wednesday (4/22)

AUS CPI q/q (Q1)
Forecast: 0.1%
Previous: 0.2%
aus cpi 4/20
(click to enlarge; source: forexfactory.com)

The AUD got a boost last week with strong employment data. If the Q1 CPI print is in line with forecast or better and the NZ CPI was negative, we should anticipate some bounce back for AUD/NZD because the RBA is indeed becoming slightly less dovish, while the RBNZ will remain dovish with a rate cut on he table. However, against the USD, the CPI data needs to be better than expected and buck the declining trend in order to get a foothold for the AUD/USD to reverse its bearish trend.

BoE Minutes – Most likely, the BoE was unanimous in its vote to maintain the benchmark interest rate and the pace of asset purchases. The MPC’s most recent change in tone is towards a more dovish stance, especially with inflation staying low. Let’s see if there were votes to cut rates, because that would give the GBP a bearish outlook.

Thursday (4/23)

German Flash Manufacturing PMI (Apr.)
Forecast: 53.1
Previous: 52.8 (revised from 52.4)
german flash manufacturing pmi april
(click to enlarge; source: forexfactory.com)
German Flash Services PMI (Apr.)
Forecast: 55.6
Previous: 55.4
Eurozone Flash Manufacturing PMI (Apr.)
Forecast: 52.6
Previous: 52.5
Eurozone Flash Services PMI (Apr.)
Forecast: 54.5
Previous: 54.2

Manufacturing and serves PMIs have been steadily rebounding since the end of 2014. If these prints continue to push higher, along with inflation picking up, the market might start anticipating some changes to the pace of QE. But for now, the PMIs are just pieces of a larger monetary policy puzzle and shouldn’t have much impact outside of the intra-session time-frame.

UK Retail Sales m/m (Mar.)
Forecast: 0.4%
Previous: 0.7%

US Jobless Claims
Forecast: 290K
Previous: 294K

US Flash Manufacturing PMI (Apr.)
Forecast: 55.6
Previous: 55.7 (revised from 55.3)

US data has been soft and disappointing. The market has become more sensitive to bad US data in the past few weeks, and has been pricing in a delay in FOMC’s planned rate hike. This has caused the USD to pare some of its gains from late 2014 and earlier in the year.

Friday (4/24)

German Ifo Business Climate (Apr.)
Forecast: 108.5
Previous: 107.9

US Durable Goods Orders m/m (Mar.)
Forecast: 0.7%
Previous: -1.1%
Core Durable Goods Orders m/m (Mar.)
Forecast: 0.2%
Previous: -0.6%
core durable goods 4/20
(click to enlarge; source: forexfactory.com)

The core reading has been negative 5 out of the last 6 months. Another negative reading can send the USD reeling. But economics are expecting a rebound. If it does, the USD might be able to take back some gains especially if it has been falling throughout the week. However, we would need another month or 2 of strong durable goods data to drive the USD into bullish continuation.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.