The last week of April spread disappointment amongst trader fraternity as some of the biggest central bankers, namely the Federal Reserve and the Bank of Japan, refrained from signaling any policy moves which the market expected badly. Further, a surprise dip in Australian inflation figures and a downbeat US GDP magnified the pessimism and dragged the USD and AUD further towards south, providing consecutive third monthly negative closing to the US Dollar Index (I.USDX). The Japanese Yen gained considerably after the BOJ Governor, Haruhiko Kuroda, asked for more time to analyze the recent negative interest-rate effect before announcing any further moves while the Federal Reserve omitted any details to indicate possibility of near-term rate hike. Moreover, the GBP and EUR remained sluggish due to weaker GDP and Inflation numbers while NZD and CAD remained strong as commodity basket, headed by Crude and Gold, rallied on weaker Dollar and improvement in China.
Coming to first full week of May, headline economics, mainly in the form of PMI and job details, would grab the market attention. Amongst which, Sunday's Chinese official Manufacturing and Non-Manufacturing PMIs signaled that the dragon nation is slowly emerging out of its drawbacks as manufacturing gauge printed another 50+ number for second consecutive month while Non-manufacturing Index remained well above 50 contraction level.
Looking forward, monetary policy meeting of the Reserve Bank of Australia and Job details from US, Canada and New-Zealand are likely details that market players would closely examine in order to seek relief from recent turmoil. Moreover, headline PMI numbers from US, UK and China, together with Australian, Canadian and US Trade Balance, are some additional data-points that would continue propelling this week's market moves. Let's discuss them in detail.
After FOMC, US Job Details Would Be On Market Players' Radar
Even if the US Federal Reserve failed to utter anything that supports chances of another interest-rate hike, the central banker also didn't rule out the possibility of a rate lift-off by continuing on its tone to "depend upon upcoming data-points". Hence, April month job numbers, comprising the headline NFP, Unemployment rate and the Average Earnings, become important as sustained improvement in labor market might force the Fed towards a rate-hike signal in its June meeting.
In its latest prints, the US job details flashed quite mixed signals as Unemployment rate ticked up to 5.0% from its eight year low of 4.9% while the Earning and NFP surpassed previous numbers with 0.3% growth & 215K mark. During its Friday release, the NFP is expected to dip a bit to 206K while the Unemployment Rate and Earning details are likely to remain at their previous levels of 5.0% and 0.3% respectively. Moreover, Wednesday's ADP Non-Farm Employment Change, considered to be an early signal for Friday's NFP, is expected to improve from its 200K mark to 205K.
In addition to the job details, Monday's ISM Manufacturing PMI, Wednesday's Trade Balance, ISM Non-Manufacturing PMI and Factory Orders, are some other data-points that USD traders might be interested in observing. While Factory Orders is expected to reverse prior -1.7% loss with +0.7% mark, the ISM Non-Manufacturing and Trade Balance are also likely to print upbeat numbers, with 54.9 v/s 54.5 prior and -1.2B against -1.9B previously respectively. Though, the ISM Manufacturing may continue signaling uncertainty for the USD with 51.6 mark compared to 51.8 prior.
Considering slew of recent downbeat data-points, another weak prints by the headline numbers, mainly by the job details and Factory Orders, might continue raising bars for the Federal Reserve to announce its much awaited interest-rate hike, which in-turn can stretch the USD's on-going south-run.
Amidst Looming Risk of 'Brexit' Headline PMIs Might Direct GBP Moves
As we're just one month away from the important 'Brexit' referendum vote, which would determine whether the UK will remain in EU or not, outcomes from the polls signaling supporters/opponents of such a drastic move would contribute heavily to GBP moves. Moreover, headline PMIs, namely the Manufacturing, Construction and Services, up for Tuesday, Wednesday and Thursday respectively, would provide additional cues for the UK currency traders.
Observing the details, it seems that while Manufacturing PMI is likely to remain negative for fourth consecutive month, with -12 against -14 prior, the Construction and Services PMIs may print numbers near to their prior levels of 54.1 (against 54.2) and 53.6 (versus 53.7) respectively. Given the headline PMIs, mainly the Services PMI, mark welcome numbers, recent improvement in polls avoiding 'Brexit' might provide additional strength to the GBP.
AUD Traders To Observe RBA Outcome And Chinese PMIs
After Australian CPI dropped to seven years low and the PPI also marked the lowest reading in four years, speculations concerning a rate-cut from the Reserve Bank of Australia (RBA) have gained momentum. Hence, monetary policy meeting of the Australian central banker, on Tuesday, will be closely observed in order to receive any signals for the rate-cut.
On the data front, monthly reading of Chinese Caixin Manufacturing, scheduled for Tuesday, followed by Australian Retail Sales and Trade Balance, up for Thursday, will also provide intermediate trading opportunity for AUD participants. If we look at the consensus, the Caixin PMI may continue remaining in its below 50 zone with 49.8 mark against 49.7 prior while Retail Sales is expected regain its 0.3% growth against 0.0% prior and the Trade deficit may drop to -2.95B against -3.41B previous reading.
With the recent improvement in Chinese economics, an above 50 mark of Caixin Manufacturing PMI might help the AUD while RBA's tendency to avoid any immediate action, as far as monetary policy is concerned, might propel the Australian Dollar to reverse its recent losses. However, recent drop in AU inflation number could force to central banker to signal a near-term rate-cut which in-turn might magnify the AUD downturn.
Last But Not The Least: Canadian And New-Zealand Data-Points
While US job numbers and RBA are likely acquiring centre-stage of this week's market moves, labor market details from Canada and New-Zealand, coupled with the Canadian Ivey PMI and Trade Balance, are some other data-points that can keep market players busy during the week.
On Tuesday, the Statistics New-Zealand is scheduled to release quarterly details of Employment Change and Unemployment rate. The Employment Change is expected to slow down a bit with 0.6% growth against 0.9% prior while the Unemployment rate may tick up to 5.5% as compared to 5.3% released during February. Moving on, the Canadian Trade Balance, up for Wednesday, might help the on-going CAD up-move with -1.2B number versus -1.96B prior while the Ivey PMI, to be out on Friday, becomes a reason to worry as it is near to 50 contraction level and has been declining since last three months. Furthermore, the Canadian Employment Change, also scheduled for Friday, is expected to dip with 0.2K mark compared to 40.6K prior while the Unemployment rate might rise to 7.2% from 7.1% prior.
Although rising commodity prices continue helping these export-oriented currencies, weaker plots of important job details, coupled with chances of a profit-booking in Crude, could trigger NZD and CAD downside.
Follow me on twitter to discuss latest markets events @Fx_Anil