Key Fundamental Factors this Week (5/18 – 5/22)

Key Fundamental Factors this Week (5/18 - 5/22)

Last week, the USD continued to slide as economic data remained soft. The GBP strengthened as the BoE inflation showed optimism ahead despite soft inflation and growth in Q1. Let’s see what’s in store for us this week in terms of fundamental risk.

Tuesday (5/19)

RBA Monetary Policy Meeting Minutes will be released and might give some insight on the RBA’s thinking when it cut its official cash rate a couple of weeks ago. The market believes that was the last rate cut this year. If the Minutes show any sign that another rate cut would be on the table, we might see the AUD soften against the USD or NZD.

NZ Inflation Expection q/q:
Previous: 1.8%

UK CPI y/y (April)
Forecast: 0.0%
Previous: 0.0%
uk cpi april
(click to enlarge; source:

As the chart above shows, inflation has been declining since 2011. It is now at an annual rate of 0.0%. Despite this trend, the BoE believes inflation will return to target in 2 years. If the April reading is below 0.0%, this optimism will hold less water and the GBP’s strength last week could take a few steps back. On the other hand, a reading above 0.1% would likely extend GBP strength.

German ZEW Economic Sentiment (May)
Forecast: 48.9
Previous: 53.3
A reading under 50 would reflect contraction in May and put an end to a 3-month expansion from February to April. The Euro has been resilient the past few weeks, but if we start to see soft economic data again, expect that resilience to end.

EUR ZEW Economic Sentiment (May)
Forecast: 62.4
Previous: 64.8

US Building Permits (Apr.)
Forecast: 1.06M
Previous: 1.04M

NZ GDP Price Index
Previous: -3.5%
nz dairy prices
(click to enlarge; source:
Part of the reason that NZD continues to be weak is that the RBNZ might cut interest rates soon. Another factor was the declining dairy and dairy product prices. Continuing expectation of declining dairy prices not only suggests disinflation, but also declining growth for New Zealand’s dairy-laden economy.

Wednesday (5/20)

JPN Prelim GDP q/q (Q1)
Forecast: 0.4%
Previous: 0.4%
GDP data has been soft, and is a reason the BoJ is maintaining its stimulus measures.

US FOMC Meeting Minutes might reveal whether the FOMC is really hawkish about raising rates. The market believes the committee is projecting a September rate hike because despite soft data in Q1, the FOMC believes things will pick up.

Thursday 5/21

German Flash Manufacturing PMI (May)
Forecast: 51.9
Previous: 52.1
German Flash Services PMI (May)
Forecast: 53.9
Previous: 54.0
EU Flash Manufacturing PMI (May)
Forecast: 51.8
Previous: 52.0
EU Flash Services PMI (May)
Forecast: 53.9
Previous: 54.1

UK Retail Sales m/m (Apr.)
Forecast: 0.4%
Previous: -0.5%
uk retail sales apr 2015
(click to enlarge;
Positive retail sales data for April can continue to fuel the recent GBP-strength. A flat or negative reading will do to the GBP what soft data has been doing to the USD.

US Jobless Claims
Forecast: 267K
Previous: 264K (Previous Week)
The FOMC wants to see further improvement in the labor market before it decides to raise rates. In terms of jobless claims data, this has been the case. However, because the market is already used to seeing a good jobless claims trend, it might not be good enough to help reignite USD-strength.

Friday (5/22)

BoJ Monetary Policy Statement – The BoJ has been steadfast in maintaining its accommodative stance. With GDP and inflation data still soft, and with higher consumer tax rates being implemented, the BoJ will likely stay course, which means the JPY should remain somewhat pressured, but not like it was in 2012 and 2013.

German Ifo Business Climate 
Forecast: 108.3
Previous: 108.6

CAN CPI m/m (Apr.)
Forecast: 0.1%
Previous: 0.7%
Core CPI m/m (Apr.)
Forecast: 0.1%
Previous: 0.6%
can cpi apr
(click to enlarge; source:
CAN Retail Sales (Apr.)
Forecast: 0.5%
Previous: 1.7%
Core Retail Sales (Apr.)
Forecast: 0.5%
Previous: 1.7%
April has been a good month for the Canadian dollar, and CAD-strength was accompanied by some strong retail sales and stead inflation data. We might find the CAD giving back some strength his week with the anticipation of softer inflation and retail sales data.

US CPI m/m (Apr.)
Forecast: 0.1%
Previous: 0.2%
US CPI Inflation April
(click to enlarge; source:
Core CPI m/m (Apr.)

Forecast: 0.2%
Previous: 0.2%
The USD has a chance to reclaim some dominance if the week ends with strong inflation data. The forecast however does not expect anything spectacular, in fact showing some pessimism. I believe there is more upside than downside risk in this CPI data – meaning strong CPI data should help the USD gain more than weak CPI data would soften the USD. This is assuming that the USD extends this week’s weakness into the upcoming one.

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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