Key Fundamental Factors this Week (4/27 – 5/1)

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Key Fundamental Factors this Week (4/27 - 5/1)

The market was focused on the USD last week. Soft economic data kept pressure on the greenback. Let’s see what is in store for us this week in terms of fundamental risk.

Tuesday (4/27)

UK Prelim GDP q/q (Q1)
Forecast: 0.5%
Previous: 0.6%
uk prelim gdp q1 2015
(click to enlarge; source: forexfactory.com)

The Bank of England has turned from hawkish to neutral in 2014 and started to turn dovish in 2015. Part of the reason for that is the slowing of growth we can see from the GDP data. If Q1 GDP data comes in at 0.5% or lower, it would make it the 4th quarter in a row. This would keep the GBP pressured especially against the USD, which despite recent losses is still a strong currency due to FOMC’s hawkish stance (it wants to raise rates by end of the year.) A reading above 0.6% would be a break from the 3-quarter GDP decline, and can be a factor in lifting the GBP, especially against the Euro, which is pressured because the ECB is still ramping up its bond purchases.

US CB Consumer Confidence (April)
Forecast: 102.6
Previous: 101.3
CB consumer confidence Apr 2015
(click to enlarge; source: forexfactory.com)

Sentiments remain strong in the US despite soft data of late. This suggests that the deceleration of growth in the US would be temporary and the trend of strong economic recovery will eventually come back.

NZ Trade Balance (March)
Forecast: 312M
Previous: 50M

ANZ Business Confidence
Previous: 35.8

Wednesday 4/29

German Prelim CPI m/m (April)
Forecast: -0.1%
Previous: 0.5%
German CPI March
(click to enlarge; source: forexfactory.com)

US Advanced GDP q/q (Q1)
Forecast: 1.0%
Previous: 2.2% (revised from 2.6%)
us advanced GDP q1
(click to enlarge; source: forexfactory.com)

The greenback has been giving back gains in the recent weeks along with disappointing economic data since the beginning of the year. The GDP data is expected to slide to 1.0% in Q1, and the Q4 GDP has been revised down to 2.2%. The market has already priced this in for the most part, but might continue to keep a leash on the greenback if GDP data comes in close to expectation for Q1.

FOMC Monetary Policy Statement and Press Conference – The main thing to watch from the FOMC statement and press conference is the tone the committee uses in discussing the slower growth numbers relative to its projections early in the year. Surely ,the mid-year interest rate hike is not happening, but the question is whether the bank is still optimistic and still plans to raise rates by the end of the year.

RBNZ Monetary Policy Statement – The RBNZ is in a neutral stance after being hawkish in the first half of 2014. It has turned a bit dovish as it leaves a rate cut on the table. AT least, there is no rate hike expectation at the moment. Last time around, most expectations were for a hold, but some expected a rate cut. Market watchers continue to expect an upcoming rate cut, so the NZD should be pressured at least in the earlier part of the week. If it does not cut rates, we can expect a rebound.

Thursday (4/30)

BoJ Monetary Policy Statement and Press Conference – There has not been any shift in BoJ’s stance for a while now. It is maintaining its pace of quantitative/qualitative easing. Some are expecting more talk of easing, and we see that on Thursday, we can expect the JPY to weaken again, especially against the USD.

Eurozone CPI Flash Estimate y/y (April):
Forecast:  0.0%
Previous: -0.1%
eurzone cpi prelim y/y
(click to enlarge; source: forexfactory.com)

The lack of inflation has pushed the ECB to implement QE. We are seeing some rebound from below 0.0 this  year, and the CPI is expected to be flat in 12 months leading to April 2015. If the CPI does not climb back to 0 or above, the euro will likely continue to slide especially against the USD.

CAN GDP m/m (February): 
Forecast: -0.2%
Previous: -0.1%

Canadian data has been inconsistent, which is better than consistently poor. It has been strong lately across the board, but poor GDP data can keep a leash on the loonie. However, keep in mind that this is February’s data, and we are already in April. The market is forward looking, so outside of the short-term a reading in-line with expectation should not hamper the CAD’s momentum. On the other hand, a flat to positive reading will likely give the CAD a strong push because it already has bullish momentum in the recent couple of weeks.

US Jobless Claims
Forecast: 297K
Previous Week: 294K

Friday (5/1)

AUS PPI q/q (Q1) 
Forecast: 0.2%
Previous: 0.1%

UK Manufacturing PMI (April)
Forecast: 54.6
Previous: 54.4

US ISM Manufacturing PMI (April)
Forecast: 52.1
Previous: 51.5
US ISM Manufacturing PMI
(click to enlarge; source: forexfactory.com)

Manufacturing growth has been disappointing in 2015. The chart above shows 5 straight months of deceleration in manufacturing growth. Part of this was due to declining oil prices which stalled oil production related industries. We have seen oil prices stabilize, and are expecting a slight uptick in April’s manufacturing data. If the ISM manufacturing PMI misses however, look for further USD-selling, which is the momentum at least for the last couple of weeks.

Revised UM Consumer Sentiment
Forecast: 96.1
Preliminary Estimate: 95.9

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