Daily Currency Market News
Here's what's moving markets.
The week ahead will be calm in terms of market driving data. Most interesting of which will be the preliminary private sector PMI readings coming out of several countries, which might confirm expectations for improved momentum through Q2.
In England, vast swathes of the economy are permitted to reopen on Monday. How this impacts inflation will be one of many issues at hand.
Market players will be receiving a full check-up on the Chinese economy this week, which could raise concerns over rising global inflation and add to the volatility in the financial markets.
USD | Adding fuel to inflation’s fire
The highlight last week was the sharp rise in U.S. inflation, which sparked speculation as to whether the U.S. economy is overheating and whether the Fed is one step away from tightening. This week kicks off with a few Fed speeches to take note of in addition to the FOMC Minutes (Wed) which will provide more inflation insights, something the market will probably be sensitive to. The preliminary PMI readings on Friday will draw attention, as expectations are that these numbers will remain robust. In general, the jump in inflation, which is also the biggest headache for markets, might continue to be reflected over the Treasury yields curve. Key figures coming up: - On Monday (05/17): NAHB Housing Market Index (May) | NY Empire State Manufacturing Index (May) | FOMC/Fed Members Speech - On Tuesday (05/18): Building Permits (Apr) | Housing Starts (Apr) | API Weekly Crude Oil Stock - On Wednesday (05/19): EIA Weekly Distillates Stocks | FOMC meeting Minutes - On Thursday (05/20): Initial Jobless Claims (Weekly) - On Friday (05/21): Manufacturing PMI (Prelim, May) | Services PMI (Prelim, May)
EUR | Shorting Eurozone bonds
The upcoming week will improve the market’s view not only of how the Eurozone performed during Q1 of this year but also how the bloc continues to perform throughout Q2. Following a quiet Monday, the market will wait for a revision of Q1 GDP numbers on Tuesday, but at the end of the week, preliminary PMIs for May will bring fresh figures, which is set to confirm expectations for improved momentum through Q2. Meanwhile, movements in Eurozone bond yields will also draw interest, as improving economic indicators and a pick-up in the Covid-19 vaccination rollout have started to put some upward pressure on eurozone borrowing costs. Key figures coming up: - On Tuesday (05/18): EZ Employment Overall (Q1) | EZ GDP (Q1) | Trade Balance (Mar) - On Wednesday (05/19): ECB Financial Stability Review | EZ Consumer Price Index (Apr) - On Thursday (05/20): German Producer Price Index (Apr) | Current Account (Mar) - On Friday (05/21): German Manufacturing PMI (Prelim, May) | EZ Manufacturing PMI (Prelim, May) | EZ Services PMI (Prelim, May) | EZ Consumer Confidence (Prelim, May)
GBP | Thirsty Brits will enjoy their first pint indoors
In England, vast swathes of the economy are permitted to reopen on Monday, including indoor dining and drinking. How this impacts inflation will be one among many issues to consider. Besides this, there are growing concerns about the transmissible nature of the Indian variant of coronavirus. Market players will be receiving a full check-up on the U.K economy this week, with the latest labor market on Tuesday, inflation on Wednesday, and retail sales and PMIs on Friday reports all due. Expect the retail sales and services PMI figures to have the greatest impact on the Pound. Key figures coming up: - On Tuesday (05/18): Unemployment Rate (Mar) - On Wednesday (05/19): Consumer Price Index (Apr) | Producer Price Index (Apr) - On Thursday (05/20): CBI Industrial Trends Orders (May) | GfK Consumer Confidence (May) - On Friday (05/21): Retail Sales (Apr) | Manufacturing PMI (Prelim, May) | Services PMI (Prelim, May)
JPY | It won´t be this week that Japan will see some upbeat data
Last week was marked by sharp movements in the Japanese Yen rate, with the correlation between the currency and U.S. Treasury yields being the key driver. Mixed domestic data also did little to help the JPY. It is another busy week ahead, with preliminary GDP numbers for Q1 due out on Monday, finalized industrial production figures for March, along with trade balance for April, are due out on Wednesday. In general, Japan’s economy is expected to contract again due to a drop in consumption. Wrapping the week up, market players will watch for private sector PMIs for May on Thursday to see if recent progress continues. Key figures coming up: - On Monday (05/17): Producer Price Index (Apr) | GDP (Prelim, Q1) - On Tuesday (05/18): Tertiary Industry Activity Index (Mar) - On Wednesday (05/19): Capacity Utilization (Mar) | Industrial Production (Mar) | Core Machinery Orders (Mar) | Trade Balance (Apr) - On Thursday (05/20): Services PMI (Prelim, May) | Manufacturing PMI (Prelim, May) | Consumer Price Index (Apr)
CAD | It’s not as exciting as the recent U.S. figures
The Loonie continued to rally over the last week, touching levels not seen since 2017. The recent BoC’s hawkish outlook, along with higher commodity prices are the key bullish fundamentals for the currency. Early in the week, housing starts data are due out but will likely have a muted impact. The highlight this week will be the April Consumer Price Index data on Wednesday. Although the inflation report will not be as exciting as the recent U.S. figures, inflation is expected to jump and have considerable influence on the Loonie. Closing the week, March retail sales figures on Friday are set to show that the economy was progressing well just before a renewed surge in Covid-19 cases hit the country in April. Key figures coming up: - On Monday (05/17): Housing Starts (Apr) - On Wednesday (05/19): Consumer Price Index (Apr) - On Thursday (05/20): ADP Nonfarm Employment Change (Weekly) | New Housing Price Index (Apr) - On Friday (05/21): Retail Sales (Mar)
MXN | With inflation already priced in, Covid is again in the spotlight
The highlight last week was Mexico’s Central Bank (Banxico) unanimously keeping its policy rate unchanged at 4.00%, in line with market consensus. The decision reflected a more worried board with the inflation prospects, noting that the balance of risks for inflation is now biased to the upside. Banxico expects higher inflation in the short term, although still expecting inflation convergence to the 3% target in 2Q22. It is a quiet week ahead on the economic calendar, with Mexico updating its retail sales report for March on Friday. While there are no major risks to consider, market participants will need to continue to eye the pandemic situation. Key figures coming up: - On Monday (05/17): Employment change (Q1) - On Tuesday (05/18): Economic Activity (Apr) | FX Reserves (Weekly) - On Friday (05/21): Retail Sales (Mar)
CNY | Will China make a prudent decision?
Early last week, China showed to the world that its factory gate prices rose at the fastest rate in three and a half years in April, which raised concerns over rising global inflation and added volatility in the financial markets. Looking ahead, China will have a busy start to the week, with industrial production, retail sales, and unemployment figures which are due out on Monday. Expect the retail sales and industrial production figures to have the greatest influence on market risk sentiment. On Wednesday, China’s Loan Prime Rates will likely be left unchanged. China’s Central Bank is expected to maintain a neutral monetary policy stance this year and avoid making sharp policy adjustments. Key figures coming up:
- On Monday (05/17): House Prices (Apr) | Industrial Production (Apr) | Retail Sales (Apr) | NBS Press Conference
- On Wednesday (05/19): PBoC Loan Prime Rate
BRL | Without the BCB, Real is vulnerable this week
Over the last week, the Brazilian Real continued to benefit from the rise in commodities and interest rate increases by the central bank. Both factors tend to contribute to the USD inflows. This week, due to the lack of relevant economic data, the ongoing investigations to assess the government’s response to the pandemic (Covid CPI) will continue to have a decisive influence on markets, as it increases the level of institutional conflict. The international headlines, in particular, economic data from the U.S., are likely to have a greater influence on the Brazilian Real. Key figures coming up:
- On Monday (05/17): BCB Focus Market Readout
- On Friday (05/21): Federal Tax Revenue
Today's Economic Calendar
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