The main release in the week ahead for the U.S. Dollar is Q1 GDP data. This is the preliminary estimate for growth in Q1 so it is a big deal. It is probably also the main release for financial markets as a whole.
Official estimates are for growth in the U.S. to have risen by an annualised 1.8% compared to the previous quarter (annualised means taking the quarter-on-quarter change and extrapolating it to reflect what it would look like over a whole year). This would be slower than the 2.2% previously.
The main risk is that the actual figure will be higher-than-expected, however, and this will start to dispel widespread notions the U.S. economy is in decline and revive the idea the Federal Reserve (Fed) might raise interest rates in 2019. Such an outcome would be beneficial for the Dollar.
U.S. data could be characterised as being mixed to improving recently so GDP could be a big deciding factor.
Over the last two weeks factory orders, inflation, retail sales, the trade balance and jobless claims all came out better than expected; whilst housing, PMIs and industrial production undershot expectations. A lot, therefore, hinges on the GDP as a sort of deciding factor to either ‘seal the deal’ on the U.S. rebound or leave the jury out. The stronger trade data in Q1 is going to be a major positive boost to Q1 GDP.
The Ifo German business sentiment index for April is a key release in the week ahead for the single currency. It is scheduled for Wednesday when the Business Climate Index is forecast to rise to 99.9 from 99.6 previously. Current Conditions are forecast to rise to 108.7 from 103.8. Expectations are expected to fall to 94.7 from 95.6.
The Ifo is often viewed as a leading index for the wider economy so if it rises strongly it will often be taken as a positive sign for the Euro and can lead to gains for the currency.
Another key sentiment gauge for the Eurozone is official Eurozone consumer confidence in April, released on Monday at 15.00. This is forecast to show a balance of -7 from -7.2 previously. The balance reflects the balance of positive to negative survey responses. It can sometimes impact on the Euro if it varies from expectations dramatically. It is often a fairly accurate leading indicator of economic growth.
Politics is back on the agenda for Sterling as UK parliamentarians return to their desks after the long Easter break.
A top member of Prime Minister Theresa May's Conservative Party will tell her in the coming week that she must step down by the end of June or her lawmakers will try again to depose her, the Sunday Times reported, without citing sources.
The pressure on May comes amidst a precipitous drop in support for the Conservative party after a lengthy Brexit delay was announced, with voters apparently flocking to the newly-formed Brexit Party of Nigel Farage. We see the implications of the sudden shift in domestic politics as posing downside risks to Sterling with a 'Brexit at all costs' likely to come on October 31.
It is a thin week for UK data with the most important releases being the UK public borrowing data and figures from the Consortium of British Industry (CBI), which is often a useful leading indicator for the broader economy. UK public borrowing basically measures how much the government needs to borrow to meet its outgoings in the month in question. The data on Tuesday is forecast to show a relatively small £50m (£0.05bn) sum was required to cover the shortfall.
The main event for the Canadian Dollar is the Bank of Canada (BOC) rate meeting on Wednesday. The BOC is not expected to change interest rates at the meeting so the impact on the Canadian Dollar will depend on the language of the accompanying statement.
Although data and the outlook has improved the consensus appears to be that the BOC will not yet be ready to raise interest rates. The BOC may signal a greater willingness to raise rates in the future, however, in its statement, and that could push up the Canadian Dollar.
The Bank has raised rates five times since the summer of 2017 but has been on hold since October 2018 when it last hiked its overnight rate. However, despite becoming more cautious, the BoC has maintained a tightening bias and Governor Poloz recently suggested he thinks the slow patch in the Canadian economy will be temporary, however that could be hope rather than judgement.
Global investor sentiment is likely to determine the Australian Dollar's direction over coming days. The Aussie tends to do well when global stock markets and commodity markets are rising; particularly if that rise is linked to good news out of China.
While there are no major Chinese data releases to watch out for, developments in China from an economic and financial perspective will be watched. Developments in U.S.-China trade negotiations are of particular interest with signs pointing to a positive resolution.
The main fundamental data release for the Aussie Dollar is inflation data out on Wednesday at which is forecast to show a 1.5% rise compared to a year ago, and a 0.2% rise quarter-on-quarter in Q1.
If the actual results are as forecast, inflation will have fallen from the previous period when it showed a 1.8% and 0.5% respective rise.
There are no major releases on the horizon for the New Zealand Dollar but the major fundamental themes may still be affected by global risk sentiment in the week ahead.
The Kiwi tends to be supported by any improvement in the global backdrop; an example of which we saw last week after the release of positive Chinese data for Q1 which suggests New Zealand's largest export destination might be turning a corner.
This bodes well for the outlook for New Zealand foreign exchange earners, such as milk.
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies