Review of the main events of the Forex economic calendar for the next trading week (02.05.2022 – 08.05.2022)
Despite the decline on Friday, the dollar strengthened again last week, and the DXY dollar index added more than 2.0%, coming close to 104.00. This was the 4th consecutive week of the dollar strengthening and the DXY rising. If we do not take into account the weakening of the dollar in July, October and December, we can say that since the middle of last year the dollar has been steadily strengthening, and the DXY dollar index has grown by +15% during this time.
Market participants are counting on further strengthening of the dollar against the backdrop of increasing divergence in the monetary policies of the Fed and other major world central banks.
A soon as the beginning of next month (May 4), the Fed is expected to make a decision to raise the interest rate again by 0.50% at once. This is the most likely scenario, although more radical solutions are not ruled out.
In addition to the Fed, meetings of the central banks of Australia and the UK will also be held next week, and on Friday, as is usually the case on the first Friday of the month, the US Department of Labor will publish monthly data on the labor market, which is of key importance for the Fed (along with data on GDP and inflation). Market participants will also pay attention to the publication of important macro statistics from Germany, the US, New Zealand, the Eurozone, and Canada.
So next week promises to be extremely volatile and interesting in terms of new trading opportunities.
*during the coming week, new events may be added to the calendar and / or some scheduled events may be canceled
Monday, May 2
Banks in the UK will be closed for the Early May Bank Holiday. Therefore, trading volumes during the European session will be lower than usual.
06:00 EUR Retail sales in Germany
Retail sales is the main indicator of consumer spending in Germany showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Previous values: +0.3% (+7.0% yoy) in February, +2.0% (+10.3% yoy) in January, -5.5% (0% yoy) ) in December, +0.8% (+0.5% yoy) in November, +0.5% (-2.9% yoy) in October, -1.9% (-0.6 % yoy) in September 2021.
The data indicate the instability of the recovery of this sector of the German economy, including due to lockdowns. Data better than the forecast and / or the previous value is likely to have a positive impact on the euro, but only in the short term. Forecast for March: +0.3%.
14:00 USD Manufacturing PMI (from ISM)
The US Manufacturing PMI published by the Institute for Supply Management (ISM) is an important indicator of the state of the US economy as a whole. A result above 50 is considered positive and strengthens the USD, one below 50 is considered negative for the US dollar. Forecast: 58.0 in April (against 57.1 in March, 58.6 in February, 57.6 in January). The index is above the 50 level and has a relatively high value, which is likely to support the dollar. Data above the value of 50 indicates an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast and especially below the value of 50, the dollar may sharply weaken in the short term.
Tuesday, May 3
04:30 AUD RBA’s interest rate decision. RBA’s accompanying statement
The main negative factors for the Australian economy are weak wages growth, a weak labor market and a slowdown in growth. Now the Australian economy is struggling due to the coronavirus pandemic, which has hit the tourism and transport sectors.
It is expected that at this meeting the Central Bank of Australia will leave the rate at the current level of 0.1%, although unexpected decisions are not ruled out, for example, an increase in the interest rate by 0.15%.
Australia’s economic recovery is accelerating and the budget trajectory is ahead of earlier expectations, S&P recently said after the Australian government released the country’s budget proposal for the 2022-2023 fiscal year. It provides for tax cuts on fuel, an easing of the tax burden for people with low and medium incomes, as well as one-time payments to almost a quarter of the country’s population to support the financial condition of households. The government expects that in the 2022-23 financial year, the country’s economy will grow by +3.5%, the unemployment rate will fall to a minimum since the early 1970s (in February, unemployment in Australia fell to 4.0%, the lowest since August 2008), and salaries will increase by about 3.25%. This, in turn, will allow the Reserve Bank of Australia to start normalizing monetary policy.
At the same time, inflation is accelerating in the country’s economy (in the 1st quarter of 2022, the consumer inflation index CPI increased by +5.1% against the forecast for growth by +4.6% and +3.5% in the previous quarter) . The trimmed mean consumer price index rose +3.7% (yoy) after rising +2.6% in Q4 2021, exceeding the forecast (+3.4%) and RBA-defined target range of 2%- 3%. Nearly a multiple of inflation above the RBA’s target range will also put pressure on the central bank to tighten monetary policy.
In an accompanying statement, the RBA officials will explain the reasons behind the rate decision. If the RBA signals the possibility of easing monetary policy in the near future, the risks of the fall of the Australian dollar will increase. And, on the contrary, tough rhetoric of the RBA’s accompanying statement may provoke the strengthening of the Australian dollar.
13:00 EUR Speech by the ECB President Christine Lagarde
During the speech of the head of the ECB, the volatility of trading increases not only in the euro and European stock indices, but also in the entire financial market, especially if Christine Lagarde touches on the subject of the monetary policy of the Central Bank. Any hints of curtailing the QE program in the Eurozone will cause the euro to rise. The soft tone of Lagarde’s speech and the propensity to continue with the ECB’s extra loose monetary policy will have a negative impact on the euro.
The speeches of the head of the ECB after the bank meetings have a particularly strong influence on the market. In previous periods, the speech of the head of the ECB in similar situations could cause a change in the euro exchange rate by more than 3%. If Christine Lagarde does not touch on the subject of the ECB’s monetary policy, the reaction to her speech will be weak.
22:45 NZD Employment rate. Unemployment rate (data for the 1st quarter)
The employment rate reflects the quarterly change in the number of employed New Zealanders. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high reading is positive for the NZD, while a low reading is negative. Forecast: in the 1st quarter of 2022, the employment rate remained at the same level (against growth of +0.1% in the 4th quarter, +2.0% in the 3rd quarter, +1.0% in the 2nd quarter, +0.6% in Q1 2021).
Also at the same time, the New Zealand Bureau of Statistics publishes a report on the unemployment rate – an indicator that assesses the ratio of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the NZD. Forecast: New Zealand unemployment in Q1 2022 was at 3.2% (against 3.2% in Q4, 3.4% in Q3, 4.0% in Q2 quarter, 4.7% in Q1 2021).
If other indicators of the report of the NZ Bureau of Statistics come out with a deterioration, this is likely to negatively affect the NZD. Worse-than-expected data will have an even stronger negative impact on the NZD.
Wednesday, May 4
01:30 AUD Retail Sales Index
The Retail Sales Level Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (for February) was +1.8% (after rising by +1.8% in January, falling by -4.4% in December 2021). If the data turns out to be weaker than the previous value, the AUD may drop sharply in the short term, if it’s above the previous values, the AUD is likely to strengthen. Forecast for March: +0.5%.
09:00 EUR Retail sales in the Eurozone
Retail sales is the main indicator of consumer spending showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast for March: +0.2% (+1.0% YoY) against +0.3% (+5.0% YoY) in February, +0.2% (+7.8% in annual terms) in January, 3.0% (+2.1% in annual terms) in December, +1.0% (+8.2% in annual terms) in November, +0.2% (+1.7% in annual terms) in October. The data suggests that, despite rising indices, retail sales have not yet reached pre-coronavirus levels after a sharp drop in March-April 2020, when tight quarantine measures were in place in Europe. However, better-than-expected data is likely to have a positive impact on the euro.
12:15 USD ADP National Employment Report
Usually, the ADP report on the level of employment in the private sector has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. The US private sector employment growth is expected to be +370,000 in April (up from 455,000 in March, 475,000 in February, 509,000 in January, 807,000 in December, 534,000 in November, 571,000 in October, 568,000 in September, 374,000 in August, 330,000 in July, 692,000 in June, 978,000 in May, 742,000 in April, 517,000 in March, 117,000 in February, 174,000 in January 2021). The relative growth of the indicator may have a positive impact on the dollar quotes, and the relative decline of the indicator – a negative effect. The market reaction may be negative, and the dollar may decline if the data also turns out to be worse than the forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. Most of the layoffs were concentrated in the tourism and retail sectors. Other important sectors of the economy also suffered. The ADP previously reported that the most significant drop in employment was recently noted in the construction sector and the financial services sector.
Although the ADP report does not have a direct correlation with the US Department of Labor official data on the labor market, which will be published on Friday, the ADP report is often its harbinger, having a noticeable impact on the market.
14:00 USD Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. These service sectors (unlike the manufacturing sector) have virtually no impact on the country’s GDP.
A result above 50 is seen as positive for the USD. Forecast for April: 59.0 (after 58.3 in March, 56.5 in February, 59.9 in January, 62.0 in December), which is likely to have a generally positive impact on the USD. However, the relative decline of the index, and especially below the value of 50, may negatively affect the dollar in the short term.
18:00 USD The Fed’s interest rate decision. The Fed’s comments on monetary policy
In March 2020, the Fed cut interest rates sharply (to 0.25% from 1.75% in February) and also announced a $700 billion program to buy U.S. government bonds and mortgage-backed securities. Subsequently, the Fed repeatedly announced additional measures to support the US economy and inject cheap liquidity into the financial system. Usually, with the easing of monetary policy, the national currency becomes cheaper and its quotes decrease.
In 2020, the dollar was declining, because investors were withdrawing funds from safe-haven assets, buying riskier and more profitable assets of the stock market, which continued to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset also declined. However, in 2021 the situation has changed – the dollar has strengthened. Now market participants are waiting for the US central bank to accelerate the cycle of tightening monetary policy.
It is widely expected that at this meeting the rate will be raised by 0.50% to 1.00%. However, during the period of publication of the rate decision, volatility may rise sharply throughout the financial market, primarily in the US stock market and in dollar quotes, especially if the rate decision differs from the forecast or unexpected statements are received from the Fed management.
Powell’s comments could affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious stance is seen as negative for the USD. Investors want to hear Powell’s opinion on the Fed’s plans for this year.
Traders should also pay attention to the Fed’s report with forecasts for inflation and economic growth for the next two years and, no less important, individual opinions of the FOMC members on interest rates.
18:30 USD Press conference of the FOMC (Federal Open Market Committee of the US Federal Reserve)
The press conference of the Federal Open Market Committee of the US Federal Reserve lasts about an hour. The first part reads the ruling, followed by a series of questions and answers that can increase market volatility. Any hints from Powell about the possibility of changing the current monetary policy will cause an increase in volatility in dollar quotes and on the US stock market.
Thursday, May 5
01:30 AUD Balance of Trade
The indicator evaluates the ratio between exports and imports. The growth of exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. Previous values: AU$7.457 billion (February), AU$12.891 billion (January), AU$8.356 billion (December), AU$9.423 billion (November), AU$11.220 billion (October), AU$12.243 billion dollars (for September), 15.077 billion Australian dollars (for August). A decrease in the trade surplus may have a negative impact on the Australian dollar. Conversely, a growing trade surplus is positive for the AUD.
11:00 GBP Bank of England interest rate decision. Minutes of the meeting of the Bank of England. The planned volume of asset purchases by the Bank of England. Monetary Policy Report
Following the results of the December meeting, the Bank of England unexpectedly raised its key interest rate to 0.25%, becoming the first leading central bank to increase the cost of borrowing since the start of the coronavirus pandemic. In February, the interest rate was raised to 0.50%, and in March to 0.75%. Members of the Monetary Policy Committee considered it appropriate to increase the cost of borrowing in a strong labor market to contain price increases. At the same time, further tightening of monetary policy may be required to bring inflation to the target level of 2.0%.
It is possible that at this meeting the Bank of England will again raise the interest rate (up to 1.00%), while maintaining the volume of purchases of government bonds at the same level of 895 billion pounds. However, despite the fact that very positive macro data is coming from the UK, the interest rate may remain at the same level of 0.75%, given the situation in Ukraine. Such a decision could cause a sharp weakening of the pound.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the votes “for” and “against” the increase / decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as a large current account deficit in the UK’s balance of payments.
The intrigue about the further actions of the Bank of England remains. Both in the pound and FTSE100 index futures, there are plenty of trading opportunities during the publication of the bank’s rate decision.
Also at the same time the report of the Bank of England on monetary policy will be published, containing an assessment of economic prospects and inflation. At this time, the volatility in the pound quotes can rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the inflation rate. If the tone of the report is soft, then the British stock market will receive support, and the pound will fall. Conversely, the report’s tough rhetoric on curbing inflation, implying a further increase in the interest rate in the UK, will lead to a strengthening of the pound.
11:30 GBP Speech by head of the Bank of England Andrew Bailey
Financial market participants are expecting Andrew Bailey to clarify the situation regarding the future policy of the UK central bank. During speeches by the head of the Bank of England, volatility usually rises sharply in the quotes of the pound and the FTSE London Stock Exchange index if he gives any hints of tightening or easing monetary policy of the Bank of England. Probably, Andrew Bailey will also give an explanation regarding the decision made by the Bank of England on the interest rate and touch upon the state and prospects of the British economy after Brexit and the partial lifting of quarantine restrictions due to the coronavirus. If Bailey does not touch on monetary policy issues, the reaction to his speech will be weak
Friday, May 6
01:30 AUD RBA monetary policy report
The monetary policy report provides an overview of economic and financial conditions and an assessment of the risks to financial stability and sustained economic growth. The report is, in a way, a guideline for determining the RBA’s monetary policy plans. A tougher stance on the monetary policy of the RBA is viewed as positive and strengthens the Australian dollar, while a more cautious stance is assessed as negative for the AUD.
12:30 USD Average hourly wages. Non-farm Payrolls. Unemployment rate
These are the most important indicators of the state of the labor market in the US in April. Forecast: +0.4% (against +0.4% in March, 0% in February, +0.7% in January 2022, +0.6% in December, +0.3% in November, +0 4% in October, +0.6% in September and August 2021) / +0.400 million (against +0.431 million, +0.678 million in February, +0.467 million in January 2022, +0.199 million in December, +0.210 million in November, +0.531 million in October, +0.194 million in September, +0.235 million in August 2021) / 3.6% (against 3.6% in March, 3.8% in February, 4.0% in January 2022, 3.9% in December, 4.2% in November, 4.6% in October, 4.8% in September, 5.2% in August 2021), respectively.
In general, the figures can be described as encouraging. The data shows continued improvement in the US labor market after its precipitous fall in the first half of 2020. Before the coronavirus, the US labor market remained strong, indicating the stability of the US economy and supporting the dollar quotes.
Predicting the market reaction to the publication of indicators is often difficult, since many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, because the economic situation in the US and many other major economies remains controversial due to the coronavirus. In any case, when the data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the financial market. Cautious investors might prefer to stay out of the market during this period of time.
12:30 CAD Unemployment rate in Canada
Statistics Canada is to publish data on the country’s labor market for April. Unemployment has risen in Canada in recent months, including against the backdrop of massive business closures due to the coronavirus and layoffs. Unemployment rose from the usual 5.6% – 5.7% to 7.8% in March to 13.7% in May 2020. If unemployment continues to rise, the Canadian dollar will decline. If the data turns out to be better than the previous value, then the Canadian dollar will strengthen. Decreasing unemployment rate is a positive factor for the CAD, rising unemployment is a negative factor. In March 2022, unemployment was at 5.3% (against 5.5% in February, 6.5% in January, 6.0% in December, 6.1% in November, 6.8% in October, 7, 0% in September 2021). Forecast for April: 5.4%.
Price chart of EURUSD in real time mode
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