Review of the Coming Week from May 30 to June 3, 2016.
Last week the US dollar was strengthening against most rival currencies and the oil prices went up. Once again, GBP/USD pair was an exception: by the end of the the week it strengthened by nearly 120 points. The pound holds positions on the market in anticipation of a favorable outcome of the referendum scheduled for the end of June. According to recent surveys, more than 50% of the UK population are against the country's exit from the EU.
Dollar continues to gain momentum on the currency market after last Friday, Fed Chairman Janet Yellen signaled the probability of an early increase in interest rates. Now traders will be focused on two major events during the coming week: the ECB's decision on interest rates (Thursday) and data on payroll jobs and unemployment level in the US in May, which is scheduled to be published on Friday.
According to the forecast, non-farm payrolls in the US economy amounted to +170,000, the unemployment remained unchanged at 5.0%. If the data is confirmed or is better than expected, the US dollar will continue to strengthen on the foreign exchange market.
A number of important data and several important news are expected during the upcoming trading week:
Monday
Calendar is mostly empty, and it's a holiday in the UK and the US.
14:00 (GMT + 2) - consumer price indices in Germany for May (pre-release).
Tuesday
1:30 - 1:50 - publication of a block of the most important macroeconomic indices of Japan for April.
9:55 - unemployment rate in Germany for May.
11:00 - unemployment rate for April and the index of consumer prices (pre-release) for May in the euro zone, which is a key indicator to assess inflation and changes in consumer preferences. Another decline is expected y-o-y (by 0.1%), which will have a negative impact on the euro.
14:30 - personal income indices for the assessment of the US labor market, and personal consumption expenditures of the US population, which is an indicator of the optimism of market participants and is used to assess the state of the economy.
14:30 - annual data on GDP for the first quarter in Canada and GDP in March.
15:00 - home price index in the US in March - an important indicator of the real estate market. High result strengthens the US dollar and vice versa. The growth is expected at 5.4% compared to the previous month.
15:45 - Chicago business activity index, giving an assessment of economic activity in the states of Illinois, Indiana and Michigan. It is expected at 50.7 (a result above 50 is positive for the US dollar).
16:00 - consumer confidence level in the US in May, reflecting the confidence of consumers in the country's economic development.
22:30 - American Petroleum Institute (API) will publish its report on the change in US oil inventories last week.
Wednesday
1:30 - Activity across the manufacturing industry of the Australian AiG (Australian Industry Group), covering business conditions in the manufacturing sector in Australia. Usually it has a strong impact on the Australian dollar.
3:00 - business activity indices in the production and services areas in China.
3:30 - Australia's GDP in the first quarter. It has a strong impact on the Australian dollar. A slight increase by 0.6% and by 2.7% y-o-y is expected. Lower-than-expected data will have a negative impact on the Australian currency.
3:45 - Caixin PMI in China's manufacturing sector. Falling below the level of 50 (with 49.3 expected) indicates a decline in activity. The indicator can have a strong impact on the world financial market, as China's economy is the second in the world after the US.
09:15 - real volume of retail trade in Switzerland, which is considered an indicator of consumer confidence for May (1.3% decline forecasted).
9:55 - 10:00 - business activity index in the manufacturing sector of Germany and the Eurozone for May from Markit.
10:30 – a block of macroeconomic data of the UK for April.
14:15 – ADP employment change in the US. An increase in the value of this indicator strengthens the dollar and vice versa. The growth is expected by 180,000.
15:45 - PMI Markit index in the US manufacturing sector in May.
16:00 - ISM business activity index in the US manufacturing sector in May, an important indicator of the state of the US economy as a whole; ISM gradual acceleration of inflation index, assessing the state of the US manufacturing sector in May; construction spending in the US in April.
After 16:00 - price index for dairy products prepared by Global Dairy Trade. We expect the usual strong influence of published data on the quotes of the New Zealand dollar.
20:00 - Beige Book of the FRS, which reviews the current situation in the US economy.
Thursday
OPEC meeting in Vienna (Austria).
3:30 - data on retail sales and trade balance in Australia in April. These usually have a significant impact on the Australian dollar quotes.
11:00 - producer price index in the euro zone in April.
13:45 - the ECB's decision on interest rates. No changes are expected, although the ECB may surprise.
14:30 - ECB press conference and comments on monetary policy in the euro zone. Usually it has a strong impact on the market. High volatility is expected on the currency market, and not only in euro pairs.
17:00 - US Department of Energy publishes its weekly report on US oil and petroleum products inventories.
Friday
3:45 - Caixin Purchasing Managers' Index (PMI) for May, which is a leading indicator of the state of China's services sector and usually has a strong influence on the financial markets.
9:55 - Services PMI business activity index from Markit Economics in Germany in May and composite business activity index in the service and manufacturing sectors in Germany.
10:00 - Services PMI business activity index from Markit Economics and composite business activity index in the manufacturing sector of the Eurozone in May.
14:30 - key monthly data on the labor market in the US in May, among which are: Non-Farm PayRolls (forecast of +170,000 new jobs against 160,000 in April); data on unemployment level in the US (5% against the 5% forecast in the previous month).
15:45 - Services PMI business activity indices from Markit in the US in May.
16:00 - Services PMI business activity indices from ISM in the US in May, industrial orders in the US in April.
Investors will closely monitor Friday's data from the US, as they will directly affect the likelihood of interest rate rise in the US in June or July. Positive data will increase such likelihood and the positions of market players that expect the dollar to grow. Negative information can cause a significant decrease in the US dollar on the financial market. In any case, the volatility in the financial market, as always, is expected to be high.
