All the currency markets are positioned for big moves next week. With many important economic indicators due to be released, the potential for movement is huge. The EUR/USD pair has continued to live under persistent selling pressure but nonetheless found support above profound multi-week lows just south of 1.1060. US Dollar Index (DXY) has continued its bullish streak, topping the key level of 100.00. According to IHS Markit, this surge is being led by the American-US trade deal optimism and a re-calibration of the market to the Federal Reserve’s interest rate directions.
Market participants have an eagle eye on the euro area for any significant developments. In particular, they are looking forward to the announcement of the final Inflation Rate on May 19. This data will provide insight into the region’s economic health and could influence the euro’s performance against other major currencies. Germany Producer Prices, May 20. That will give us a better idea of how much it costs to manufacture and all-in inflationary pressures.
Even more important, on the same day a whole set of key indicators from the European Monetary Union (EMU) will come out. These are the Current Account, Construction Output, Labour Cost Index and the European Commission’s flash Consumer Confidence report. These are the reports we expect to provide the big picture on the euro area’s economic situation. All these factors may have an adverse effect on the euro’s exchange rate.
As the week progresses, all eyes will be on the United States. We get the next key economic releases on May 22, don’t miss it. In advance of the release of the Chicago Fed National Activity Index, look for previews of the new advanced S&P Global Manufacturing and Services PMIs, Existing Home Sales and Initial Jobless Claims. These statistics are critical for understanding the vitality of the U.S. economy. They might change the political dynamics surrounding future decisions by the Federal Reserve.
Among the Australian dollar market, AUD/USD posts a second straight weekly loss. The currency has come under selling pressure after recent year-to-date highs above 0.6500. This trend is a further cause for concern over the state of Australia’s economic outlook as investors continue to be spooked. The Reserve Bank of Australia’s (RBA) interest rate decision on May 20 will be pivotal, potentially driving volatility in the AUD as traders adjust their expectations based on monetary policy direction.
More data from Australia is likely to be mixed, with the Westpac Leading Index, out on May 21. In short, this new, private index released by CVS could give us one more early glimpse into future economic activity and consumer sentiment.
The GBP/USD currency pair moved sideways, floating towards the top end of its short range. It ended the week slightly lower, struggling against strong resistance near the 1.3400 mark. This retraction underscores continued persistent market uncertainty as traders now wait for the UK Inflation Rate report scheduled for May 21. The inflation numbers are going to be very important in determining market expectations for the next BOE move.
USD/JPY has held on to weekly gains for four weeks in a row. It pulled back from a few ticks over 148.00, finding more of a home around the 146.00 area. Speculators would be watching the progress of the currency pair. Japan will release its Tertiary Industry Index on May 19, which should give excellent information on service sector activity. Japan’s Inflation Rate is expected to join in to close the week on May 23, adding more weight on how market participant behaves.