Weekly Outlook: 2014, May 18 - 25

Forex - USD/CHF weekly outlook: May 19 - 23

The dollar moved higher against the Swiss franc on Friday, but remained below the three-month peaks hit in the previous session as investors digested a mixed bag of U.S. economic data.

USD/CHF ended Friday’s session at 0.8926, up 0.19% for the day, holding just below the highs of 0.8959 struck on Thursday, the most since February 13.

The dollar was boosted after the Commerce Department reported that U.S. housing starts jumped 13.2% in April, after a 2.0% increase in March.

It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather related slowdown over the winter.

The upbeat housing data was offset by a report showing that U.S. consumer confidence deteriorated in May. The University of Michigan's consumer sentiment index dropped to 81.8, from 84.1 the month before. Analysts had expected a slight uptick to 84.5.

The dollar advanced to three month highs against Swissy in the previous session as sharp losses in the euro bolstered the greenback.

The single currency came under renewed selling pressure after weaker-than-expected data on euro zone first quarter growth added to pressure on the European Central Bank to ease monetary policy at its next meeting in June, in order to safeguard the recovery in the region.

The euro zone’s gross domestic product grew just 0.2% in the first quarter, compared to expectations for growth of 0.4% and expanded by a smaller than expected 0.9% from a year earlier.

EUR/CHF ended Friday’s session at 1.2221, edging up 0.08%.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

Ahead of the coming week, Investing.com has compiled a list of this and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.

Tuesday 20

• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• Fed Chair Janet Yellen is to speak at an event in New York.
• Later Wednesday, the Fed is to publish the minutes of its May meeting.

Thursday, May 22

• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• The U.S. is to round up the week with data on new homes sales.

USD/CAD weekly outlook: May 19 - 23

The U.S. dollar was lower against the Canadian dollar late Friday following the release of upbeat U.S. housing sector data, which offset a report pointing to a deterioration in U.S. consumer sentiment.

USD/CAD ended Friday’s session at 1.0863, down 0.17% for the day. For the week, the pair lost 0.32%.

Investor sentiment was boosted after the Commerce Department reported that U.S. housing starts jumped 13.2% in April, after a 2.0% increase in March.

It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather related slowdown over the winter.

The upbeat housing data was offset by a report showing that U.S. consumer confidence deteriorated in May. The University of Michigan's consumer sentiment index dropped to 81.8, from 84.1 the month before. Analysts had expected a slight uptick to 84.5.

Earlier in the week risk appetite was hit by concerns over the outlook for global growth after data showed that the euro zone economy grew less strongly than forecast in the first three months of the year.

The euro zone’s gross domestic product grew just 0.2% in the first quarter, compared to expectations for growth of 0.4% and expanded by a smaller than expected 0.9% from a year earlier.

In Canada, data on Friday showed that foreigners reduced their holdings in Canadian securities in March, while Canadian investors purchased foreign securities at the fastest pace in 16 months.

Statistics Canada said foreign investors sold a net C$1.23 billion in Canadian securities, while Canadian investors acquired C$7.88 billion in foreign securities, the largest investment abroad since November 2012.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

Canadian data on retail sales and consumer prices will also be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 19

• Markets in Canada are to remain closed for a national holiday.

Tuesday 20

• Canada is to publish data on wholesale sales.
• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• Fed Chair Janet Yellen is to speak at an event in New York.
• Later Wednesday, the Fed is to publish the minutes of its May meeting.

Thursday, May 22

• Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• Canada is to publish data on consumer price inflation, which accounts for the majority of overall inflation.
• The U.S. is to round up the week with data on new homes sales.

AUD/USD weekly outlook: May 19 - 23

The Australian dollar eased up modestly against its U.S. counterpart on Friday, as market players weighed a mixed bag of U.S. data on housing starts and consumer sentiment.

AUD/USD hit 0.9408 on Wednesday, the pair’s highest since April 15, before subsequently consolidating at 0.9365 by close of trade on Friday, up 0.1% for the day and 0.02% higher for the week.

The pair is likely to find support at 0.9326, the low from May 15 and resistance at 0.9408, the high from May 14.

The Commerce Department reported Friday that U.S. housing starts rose 13.2% in April, after a 2.0% increase in March. It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather-related slowdown over the winter.

But the upbeat housing data was overshadowed by a report showing that consumer confidence in the U.S. deteriorated this month. The University of Michigan's consumer sentiment index dropped to 81.8 in May, from 84.1 in April. Analysts had expected a slight uptick to 84.5.

Meanwhile, in Australia, the nation’s Treasury said, in its annual budget report released Tuesday, that the government aims to nearly halve its budget deficit over the next year through a combination of spending cuts and tax increases.

According to the report, the deficit is forecast to fall from A$50 billion to A$30 billion, while the spending cuts however are expected to lead to thousands of job losses.

The budget report also mentioned the government's plans to spend as much as A$11 billion on key infrastructure projects such as roads, railways and a new airport in Sydney.

Data from the Commodities Futures Trading Commission released Friday showed that speculators increased their bullish bets on the Australian dollar in the week ending May 13.

Net longs totaled 17,127 contracts, compared to net longs of 8,637 in the preceding week.

In the week ahead, investors will be looking ahead to the release of the minutes from both the Reserve Bank of Australia’s and the Federal Reserve's most recent monetary policy meeting.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.

Tuesday, May 20

• The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• Australia is to publish data on the wage price index and a private sector report on consumer sentiment.
• Fed Chair Janet Yellen is to speak at an event in New York. Later Wednesday, the Fed is to publish the minutes of its May meeting.

Thursday, May 22

• China is to publish the preliminary reading of the HSCB manufacturing index. The Asian nation is Australia’s largest trade partner.
• Australia is to produce data on inflation expectations.
• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• The U.S. is to round up the week with data on new homes sales.

Economic Calendar events to watch this week

The economic calendar for upcoming week is less busy after last week saw several key economic data releases. The main events this week are the publication of the minutes of the Federal Reserve’s April meeting and data on U.S. home sales. Economy watchers will also be focusing on manufacturing data from China and the euro zone. Here are some key events to watch:

Federal Reserve minutes

The Fed is to publish the minutes from its April 29-30 meeting on Wednesday. There was no press conference after the most recent monetary policy meeting, and the rate statement was by and large unchanged from the previous release. The minutes are expected to indicate that the unwinding of the bank’s stimulus program will proceed on its current timetable.

Fed speakers

Fed Chair Janet Yellen is to deliver the commencement address at New York University on Wednesday. Other Fed speakers this week include Richard Fischer (Dallas) on Monday, Charles Plosser (Philadelphia) and William Dudley (New York) on Tuesday, Narayana Kocherlakota (Minneapolis) and Dudley again on Wednesday; and Williams again on Thursday.

Global manufacturing data

China is to publish the preliminary reading of the HSBC manufacturing PMI on Thursday while the euro zone is also to publish its manufacturing PMI. The HSBC Chinese manufacturing PMI has remained in contraction territory since December 2013, fuelling fears over a slowdown in the world’s second largest economy. Economy watchers are expecting an uptick to 48.4 this month from 48.1 in April. The euro zone manufacturing index is expected to pull back slightly from last month’s three-year highs.

US home sales

The U.S. is to release data on existing home sales on Thursday and a report on new home sales on Friday. Market expectations are for a pick-up in sales of both new and existing homes, while weak numbers would point to underlying weakness in the sector.

Bank of Japan monetary policy announcement

The BoJ is to announce its benchmark interest rate and publish its monetary policy statement on Wednesday. The BoJ will now have data on the impact of last month’s sales tax increase on the economy, which could prompt further monetary policy action by the bank.

NZD/USD weekly outlook: May 19 - 23

The New Zealand dollar fell from the previous session’s one-week high against its U.S. counterpart on Friday, amid indications that the U.S. economy is shaking off the effect of a weather-related slowdown over the winter.

NZD/USD hit 0.8694 on Thursday, the pair’s highest since May 7, before subsequently consolidating at 0.8634 by close of trade, down 0.12% for the day but still 0.25% higher for the week.

The pair is likely to find support at 0.8607, the low from May 13 and resistance at 0.8694, the high from May 15.

The Commerce Department reported Friday that U.S. housing starts rose 13.2% last month, the largest increase in five months and following a 2.0% increase in March.

The upbeat housing data came one day after a report from the U.S. Department of Labor showed that the number of people who filed for unemployment assistance in the U.S. last week fell to a six-year low of 297,000.

The robust data underlined the view that the U.S. economy was regaining traction after being slowed by unusually cold temperatures during the winter months.

Meanwhile, in its annual budget release published Thursday, New Zealand's Treasury said the operating surplus will be NZ$372 million in the year through June 2015, up from a previously forecast NZ$86 million.

The Treasury also forecast the nation's jobless rate will decline to 4.4% in 2018 from a projected 5.4% next fiscal year.

The report came after Reserve Bank of New Zealand Chairman Graeme Wheeler said last week that the speed and extent of further interest rate increases will depend on economic performance and how much the nation’s strong currency weighs on inflation.

The central bank has already raised its benchmark interest rate twice this year to 3%, after keeping at a record low 2.5% to support the economy.

Data from the Commodities Futures Trading Commission released Friday showed that speculators decreased their bullish bets on the New Zealand dollar in the week ending May 13.

Net longs totaled 19,340 contracts as of last week, compared to net longs of 20,693 contracts in the previous week.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 19

• New Zealand is to publish data on producer price inflation.

Tuesday, May 20

• Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• Fed Chair Janet Yellen is to speak at an event in New York. Later Wednesday, the Fed is to publish the minutes of its May meeting.

Thursday, May 22

• New Zealand is to produce data on inflation expectations.
• China is to publish the preliminary reading of the HSCB manufacturing index. The Asian nation is the New Zealand’s second-largest trade partner.
• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• The U.S. is to round up the week with data on new homes sales.

GBP/USD weekly outlook: May 19 - 23

The pound moved higher against the dollar on Friday, recovering from a one-month low reached in the previous session, but gains were limited following the release of mixed U.S. economic data.

GBP/USD ended Friday’s session at 1.6812, up 0.12% for the day after falling to lows of 1.6730 on Thursday, the weakest since April 16. For the week, the pair lost 0.35%.

Cable was likely to find support at 1.6730 and resistance at 1.6881, the high of May 13.

The Commerce Department reported Friday that U.S. housing starts rose 13.2% last month, after a 2.0% increase in March.

It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather related slowdown over the winter.

The upbeat housing data was overshadowed by a report showing that consumer confidence in the U.S. deteriorated this month. The University of Michigan's consumer sentiment index dropped to 81.8, from 84.1 in April. Analysts had expected a slight uptick to 84.5.

Sterling remained broadly softer after the Bank of England played down speculation over the timing of possible rate hikes on Wednesday, saying the economic recovery was still at an early stage.

The BoE left its forecasts for growth and inflation largely unchanged in its quarterly Inflation Report and indicated that it is still in no rush to hike interest rates.

The bank said there is scope to further reduce the amount of slack in the economy before hiking rates and reiterated that when rates did start to rise they would do so only gradually.

The pound had already weakened earlier Wednesday after official data showed that the U.K. unemployment rate fell to a more than five-year low in the three months to March but wage growth slowed, dampening optimism over the recovery.

The U.K. unemployment rate dropped to 6.8% in the three months to March, down from 6.9% in February but average wages rose by a weaker than expected 1.7% in the first quarter from the same period a year earlier.

Elsewhere Friday, sterling was higher against the euro, with EUR/GBP at 0.8146 in late trade, not far from the 16-month trough of 0.8125 reached on Wednesday.

The single currency remained under pressure after weaker-than-expected data on euro zone first quarter growth on Thursday added to pressure on the European Central Bank to ease monetary policy at its next meeting in June, in order to safeguard the recovery in the region.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

U.K. data on consumer prices and retail sales will also be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.

Tuesday 20

• The U.K. is to release data on consumer price inflation, which accounts for the majority of overall inflation.
• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. Meanwhile, the BoE is to publish the minutes of its May meeting.
• Fed Chair Janet Yellen is to speak at an event in New York. Later Wednesday, the Fed is to publish the minutes of its latest meeting.

Thursday, May 22

• The U.K. is to publish revised data on first quarter economic growth, as well as reports on business investment and public sector borrowing. The U.K. is also to produce private sector data on industrial order expectations.
• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• The U.S. is to round up the week with data on new homes sales.

EUR/USD weekly outlook: May 19 - 23

The euro slid lower against the dollar on Friday following the release of uneven U.S. data, as concerns over the strength of the recovery in the euro zone added to pressure on the European Central Bank to ease monetary policy.

EUR/USD was at 1.3693 late Friday, holding just above the two-and-a-half month low of 1.3647 struck in the previous session. For the week, the pair was down 0.45%.

The pair is likely to find support at 1.3647 and resistance at 1.3731, Thursday’s high.

The Commerce Department reported Friday that U.S. housing starts rose 13.2% last month, after a 2.0% increase in March.

It was the largest increase in five months, indicating that the economy is shaking off the effect of a weather related slowdown over the winter.

The upbeat housing data was overshadowed by a report showing that consumer confidence in the U.S. deteriorated this month. The University of Michigan's consumer sentiment index dropped to 81.8, from 84.1 in April. Analysts had expected a slight uptick to 84.5.

The single currency remained under pressure after weaker-than-expected data on euro zone first quarter growth on Thursday added to pressure on the ECB to ease monetary policy at its next meeting in June, in order to safeguard the recovery in the region.

The euro zone’s gross domestic product grew just 0.2% in the first quarter Eurostat reported, compared to expectations for growth of 0.4% and expanded by a smaller than expected 0.9% from a year earlier.

The French economy stagnated in the first three months of the year, while Italy, Portugal and the Netherlands all reported contractions.

Germany’s economy, the euro zone largest, outperformed in the first three months of the year, expanding 0.8%, beating expectations of 0.7%.

Also Thursday, Eurostat reported that the annual rate of inflation in the euro zone was unchanged at 0.7% in April, in line with forecasts. The inflation rate is still well below the ECB target of close to but just under 2%.

Meanwhile comments by a senior EBC official fuelled speculation that the bank is preparing to act at its next meeting in June to shore up the recovery in the currency bloc and stop inflation from falling too low.

In an interview with The Wall Street Journal, ECB Vice President Vitor Constancio said Thursday the central bank was open to more monetary easing and was determined to act swiftly if required.

EUR/JPY ended Friday’s session at 139.03, down 0.17% for the day, after falling to lows of 138.78 earlier in the session, the weakest since February 12.

In the week ahead, investors will be looking to the minutes from the Federal Reserve's latest monetary policy meeting, due for release on Wednesday, for insight on the central bank's view of the economy.

The euro zone is to publish what will be closely watched data on private sector activity on Thursday.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 19

• Germany’s Bundesbank President Jens Weidmann is to speak at an event in Frankfurt; his comment will be closely watched. Later in the day the German central bank is to publish its monthly report.

Tuesday, May 20

• In the euro zone, Germany is to release data on producer price inflation.
• In the U.S., Federal Reserve Bank of Philadelphia Charles Plosser and Federal Reserve Bank of New York President William Dudley are to speak.

Wednesday, May 21

• The euro zone is to release data on the current account.
• Fed Chair Janet Yellen is to speak at an event in New York. Later Wednesday, the Fed is to publish the minutes of its latest meeting.

Thursday, May 22

• The euro zone is to release data on manufacturing and service sector activity, while Germany and France are to release individual reports.
• The U.S. is to release its weekly report on initial jobless claims and private sector data on existing home sales.

Friday, May 23

• In the euro zone, the Ifo Institute is to publish data on German business climate.
• The U.S. is to round up the week with data on new homes sales.

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