Review of the main events of the Forex economic calendar for the next trading week (01.05.2023 – 07.05.2023)
After an extremely volatile week, the DXY dollar index ended up almost at the same level as last week, just above 101.00. Last Thursday and Friday were especially hot because of the US GDP data for the 1st quarter and ambiguous inflation indicators. The GDP data confirmed the high risks of the US economy sliding into recession: the US GDP growth slowed down more than economists expected: from +2.6% to +1.1% (against a growth forecast of +2.0%).
The disputes of market participants mainly revolve around the prospects of monetary policy. Economists are predicting a 25 basis point hike in the Fed’s interest rate to 5.25%, before the Fed officials take a pause due to the risks of increased pressure on the banking sector and the economy as a whole, to move towards monetary easing by the end of the year. The meeting of the Fed that will resolve things for market participants and the dollar will be held next week on May 2-3. Also next week, two more of the world’s largest Central Banks, Australia’s and the Eurozone’s, will hold their meetings on monetary policy issues, and market participants are waiting for unexpected decisions from the leaders of both central banks. Most economists, however, are inclined to believe that the RBA interest rate will remain at the same level of 3.60%, while the ECB interest rates will be increased by 0.25%. However, any unexpected decisions on their part will cause a sharp increase in market volatility, especially for the ECB.
Next week, market participants will also pay attention to the publication of important macro statistics from Australia, the US, Germany, the Eurozone, Canada, New Zealand, and the UK. Special attention should be paid to the publication on Friday of the monthly report of the US Department of Labor with data for April: unemployment probably remained at the minimum multi-year levels, and the average hourly wages will continue to grow, despite the fact that 181 thousand new jobs were created in the non-farm sector of the American economy.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, May 1
Several European countries and China celebrate Labor Day: stock exchanges and banks will be closed, which will affect the trading volume.
14:00 USD Manufacturing PMI(from ISM)
The US Manufacturing PMI published by the Institute for Supply Management (ISM) is an important indicator of the state of the US economy as a whole. A result above 50 is considered positive and strengthens the USD, while one below 50 is considered negative for the US dollar.
Forecast: 46.6 in April (against 46.3 in February, 47.7 in February, 47.4 in January, 48.4 in December, 49.0 in November, 50.2 in October, 50.9 in September , 52.8 in August, 53.0 in June, 56.1 in May, 55.4 in April, 57.1 in March, 58.6 in February, 57.6 in January). The index is above the level of 50 and, despite the relative decline, has a relatively high value, which is likely to support the dollar. The data above the value of 50 indicate an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast and, especially, below the value of 50, the dollar may sharply weaken in the short term.
Tuesday, May 2
04:30 AUD RBA’s interest rate decision. RBA’s accompanying statement
The main negative factors for the Australian economy are weak wages growth, a weak labor market, and a slowdown in growth. However, Australia’s economic recovery is accelerating. To curb inflation, which hit a 20-year high (in Q1 2022, Australian headline annual consumer price inflation was 5.1% and core inflation was 3.7%), the rate was raised by 0.25% to 0.35% and then to 0.85%, 1.85%, 3.10% (in December 2022), 3.60% in March 2023. In addition, the RBA signaled the likelihood of a further increase in the coming months.
“The Board will do everything necessary to ensure that over time, inflation in Australia returned to the target level – said head of the central bank Philip Lowe. – This will require further interest rate hikes in the future.”
According to the RBA forecast, next year the unemployment rate may fall to 50-year lows. “With the move towards full employment and data on prices and wages, some scaling back of the emergency monetary support provided during the pandemic is appropriate,” Lowe said.
However, at a meeting in April, the RBA took a break in the increases. What the decision of the leaders of the RBA will be this time is not entirely clear, although it is possible that at this meeting the Central Bank of Australia will again raise the interest rate. However, unexpected outcomes are also possible, for example, a decrease or a stronger increase in the interest rate.
In an accompanying statement, the RBA officials will explain the reasons behind the rate decision. If the RBA signals the possibility of easing monetary policy in the near future, then the risks of the fall of the Australian dollar will increase. And, on the contrary, tough rhetoric of the RBA’s accompanying statement may provoke the strengthening of the Australian dollar.
06:00 EUR Retail sales in Germany
Retail sales is the main indicator of consumer spending in Germany showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Previous values: -1.3% (-7.1% yoy), -0.3% (-6.9% yoy), -5.3% (-6.4% yoy) , +1.1% (-5.9% YoY), -2.8% (-5.0% YoY), +0.9% (-0.9% YoY), – 1.3% (-4.3% YoY), +1.9% (-2.6% YoY), -1.5% (-9.6% YoY), +1, 2% (+1.1% YoY), -5.4% (-0.4% YoY), +0.9% (-1.7% YoY), +0.2% (+6.9% YoY), -0.2% (+10.1% YoY) in January 2022.
The data speaks of the instability of the recovery of this sector of the German economy. Data better than the forecast and / or the previous value is likely to have a positive impact on the euro, but only in the short term.
Forecast for March: +0.4% (-6.1% in annual terms).
08:00 EUR Bank Lending Survey in the Eurozone
Conducted by EU experts in the financial sector, the survey of the state of the bank lending system is carried out 4 times a year. The main purpose of the study is to obtain extended information about the conditions of bank lending in the Eurozone.
The data obtained are used by the ECB management in making decisions on the bank’s monetary policy. This report could cause increased volatility in the euro quotes and in the European stock market at the time of its publication if it contains unexpected conclusions about the conditions for lending to businesses and households in the Eurozone.
09:00 EUR Consumer price index. Core CPI (preliminary release)
Consumer Price Index (CPI) is published by Eurostat and measures the change in prices of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the EUR, a negative result weakens it.
Previous values: +6.9% in March, +8.6% in January, +9.2% in December, +10.1% in November, +10.6% in October, +9.9% in September , +9.1% in August, +8.6% in June, +8.1% in May, +7.4% in April and March, +5.9% in February, +5.1% in January , +5.0% in December. If the data turns out to be worse than the forecast, the euro may short-term, but sharply decline. Data better than the forecast and / or the previous value may strengthen the euro in the short term. Recall that the target level of consumer inflation of the ECB is slightly below 2.0%, and the data indicate an acceleration of inflation in the Eurozone.
Forecast for April: +0.9% (+6.9% in annual terms).
Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services over a given period and is a key indicator for assessing inflation and changing consumer preferences. Food and energy are excluded from this indicator for a more accurate estimate. A high result strengthens the EUR, while a low result weakens it.
Previous values: +5.7% in March, +5.3% in January, +5.2% in December, +5.0% in November and October, +4.8% in September 2022.
If the data for April 2023 turns out to be worse than the previous value or forecast, this may negatively affect the euro. If the data turns out to be better than the forecast or the previous value, then the euro is likely to react with an increase in quotations. Core inflation in the Eurozone is accelerating, which is positive (under normal economic conditions) for the euro.
Forecast for April: +1.1% (+5.7% in annual terms).
22:45 NZD Employment rate. Unemployment rate (data for the 1st quarter)
The employment rate reflects the quarterly change in the number of employed New Zealanders. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for NZD, while a low value is negative.
Previous values: +0.2% in Q4, +1.3% in Q3, 0% in Q2 2022, +0.1% in Q1 and Q4, +2.0% in Q3, +1.0% in Q2, +0.6% in Q1 2021.
Also at the same time, the New Zealand Bureau of Statistics publishes a report on the unemployment rate – an indicator that assesses the ratio of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the NZD.
Forecast: New Zealand unemployment in Q1 2023 was at 3.5% (against 3.4% in Q4, 3.3% in Q2 and Q3, 3.2% in Q1 and Q4, 3.4% in Q3, 4.0% in Q2, 4.7% in Q1 2021).
If other indicators of the New Zealand Bureau of Statistics report come out with a deterioration, this is likely to negatively affect the NZD. Worse-than-expected data will have an even stronger negative impact on the NZD.
Wednesday, May 3
01:30 AUDRetail sales level
Retail Sales Level Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the AUD; a decrease in the indicator will negatively affect the AUD. Previous index value (for February) is +0.2% (after +1.9%, -3.9%, +1.7%, +0.4%, +0.6%, +0.6%, +1.3%, +0.2% in previous months). If the data turns out to be weaker than the previous value, the AUD may drop sharply in the short term, but if it’s above the previous values, the AUD is likely to strengthen.
Forecast for March: +0.2%.
12:15 USD ADP National Employment Report
Usually, the ADP report on the level of employment in the private sector has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. The number of employees in the US private sector is expected to increase by +150,000 in April (against an increase of 145,000 in March, 242,000 in February, 119,000 in January, 253,000 in December, 212,000 in November, 183,000 in October, 262 000 in September, 266,000 in August, 458,000 in July, 188,000 in May, 198,000 in April, 287,000 in March, 551,000 in February, 353,000 in January 2022, by 807,000 in December, 534,000 in November, 571,000 in October, 568,000 in September, 374,000 in August, 330,000 in July, 692,000 in June, 978,000 in May, 742,000 in April, 517,000 in March, 117,000 in February, 174,000 in January 2021). The relative growth of the indicator may have a positive impact on the dollar quotes, and the relative decline of the indicator is negative. The market reaction may be negative, and the dollar may decline if the data also turns out to be worse than the forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. Most of the layoffs were concentrated in the tourism and retail sectors. Other important sectors of the economy also suffered. The ADP previously reported that the most significant drop in employment was recently noted in the construction sector and the financial services sector.
Although the ADP report does not have a direct correlation with the US Department of Labor official data on the labor market, which will be published on Friday, the ADP report is often its harbinger, having a noticeable impact on the market.
14:00 USD Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. These services sectors (unlike the manufacturing sector) have virtually no impact on the country’s GDP.
A result above 50 is seen as positive for the USD. Forecast for April: 53.1 (against 51.2 in March, 55.1 in February, 55.2 in January, 49.6 in December, 56.5 in November, 54.4 in October, 56.9 in August , 56.7 in July, 55.3 in June, 55.9 in May, 57.1 in April, 58.3 in March, 56.5 in February, 59.9 in January, 62.0 in December), which is likely to have a generally positive impact on the USD. However, a relative decline in the index, and especially below 50, may have a short-term negative impact on the dollar.
18:00 USD The Fed’s interest rate decision. The Fed’s monetary policy statement
In 2020, the dollar was declining, because investors were withdrawing funds from safe-haven assets, buying more risky and profitable assets of the stock market, which continued to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset also declined. However, in 2021 the situation has changed – the dollar has strengthened. Now market participants are waiting for the US central bank to either pause or continue the cycle of tightening monetary policy, but at an even slower pace.
As expected, at this meeting the rate will be raised again (by 0.25% to 5.25%). During the publication of the rate decision, volatility can increase sharply throughout the financial market, primarily in the US stock market and in dollar quotes, especially if the rate decision differs from the forecast or unexpected statements are received from the Fed management.
Powell’s comments could affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious stance is seen as negative for the USD. Investors want to hear Powell’s opinion on the Fed’s plans for this year.
18:30 USD Press conference of the FOMC (Federal Open Market Committee of the US Federal Reserve)
The press conference of the Open Market Committee of the US Federal Reserve lasts about an hour. The first part reads the ruling, followed by a series of questions and answers that can increase market volatility. Any unexpected statements by Powell on the topic of the Fed’s monetary policy will cause an increase in volatility in dollar quotes and in the US stock market.
Thursday, May 4
01:30 AUD Balance of Trade
The indicator (balance of trade) evaluates the ratio between exports and imports. The growth of exports from Australia leads to an increase in the trade surplus, which has a positive impact on the AUD. Previous values: AU$13.870 billion (February), AU$11.688 billion (January), AU$12.237 billion (December), AU$13.475 billion (November), AU$12.743 billion (October), AU$12.444 billion dollars (September), 8.664 billion Australian dollars (for August), 8.733 billion Australian dollars (for July), 17.131 billion Australian dollars (for June), 15.016 billion Australian dollars (for May), 13.248 billion Australian dollars (for April), 9.738 billion Australian dollars (for March), 7.437 billion Australian dollars (for February), 11.786 billion Australian dollars (for January). A decrease in the trade surplus may have a negative impact on the Australian dollar. Conversely, a growing trade surplus is positive for the AUD.
Forecast for March: 12.750 billion Australian dollars.
12:15 EUR ECB’s rate decision
The ECB will publish its decision on the key rate and on the deposit rate. The ECB’s tough stance on inflation and the level of key interest rates contributes to the strengthening of the euro, a soft position and rate cuts weaken the euro. Given the high level of inflation in the Eurozone, according to the ECB management, the balance of risks for the economic outlook for the Eurozone “remains skewed to the negative side.”
“The Governing Council believes that interest rates will still need to be raised significantly … in order to ensure a timely return of inflation to a medium-term target of 2%,” the ECB said in a statement following the December meeting.
Speaking at the World Economic Forum in Davos in January 2023, the ECB President Christine Lagarde said that “inflation expectations are not easing” and “the ECB will continue to raise rates.” In her opinion, “inflation is too high”, and “the ECB intends to bring it down to 2% in a timely manner.”
The ECB believes that GDP growth may decline, including due to the energy crisis in the EU, high uncertainty, weakening global economic activity and tightening financing conditions. However, the recession should not drag on too long, although strong growth is not expected either.
“In the near future, growth will recover as the current headwinds ease. Overall, Eurosystem staff forecast economic growth of 0.5% in 2023, 1.9% in 2024 and 1.8% in 2025,” the ECB said in a statement following its December meeting.
Thus, if we follow this signal from the head of the ECB, following this meeting, the key interest rate and the ECB deposit rate for commercial banks will be increased again, most likely by 0.25% (up to 3.75% and 3.25%, respectively). But other tougher solutions are not ruled out (an increase of 0.5% or even 0.75%).
Well, since inflation in the Eurozone is still unacceptably high for the leaders of the ECB, they may announce an increase in interest rates at the next meetings.
Perhaps this will also be mentioned in the accompanying statements of the leaders of the ECB.
12:45 EUR Press conference of the ECB. ECB’s monetary policy statement
The press conference will be of major interest to market participants. In its course, a surge in volatility is possible not only in euro quotes, but also in the entire financial market, if the ECB leaders make unexpected statements. The ECB leaders will assess the current economic situation in the Eurozone and comment on the bank’s decision on rates. In previous years, as a result of some meetings of the ECB and subsequent press conferences, the euro exchange rate could move by 3% -5% in a short time.
The soft tone of statements will have a negative impact on the euro. And, on the contrary, the tough tone of the speech of the ECB management regarding the monetary policy of the central bank will strengthen the euro.
16:50 CAD Speech by head of the Bank of Canada Tiff Macklem
The Canadian economy, as well as the entire global economy, has been slowing down since 2020 (first due to the coronavirus pandemic). Earlier, Macklem said that the country’s economy is quite stable. However, the situation has changed rapidly, and not for the better. It will now be interesting to hear Macklem’s opinion on the stability of the Canadian economy and the central bank’s monetary policy.
If Macklem touches upon the subject of the monetary policy of the Bank of Canada, the volatility in the quotes of the Canadian dollar will increase sharply. The tough tone of his speech will help strengthen the Canadian dollar. The soft rhetoric of Macklem’s speech and the tendency to conduct a loose monetary policy will negatively affect the CAD quotes.
He is also likely to explain the Bank of Canada’s recent interest rate decision and may provide some guidance for investors ahead of the next central bank meeting likely next month.
Friday, May 5
01:30 AUD RBA’s monetary policy statement
The monetary policy statement provides an overview of economic and financial conditions and an assessment of the risks to financial stability and sustained economic growth. The statement is, in a way, a guideline for determining the RBA’s monetary policy plans. A tougher stance on the monetary policy of the RBA is seen as positive and strengthens the Australian dollar, while a more cautious stance is seen as negative for the AUD.
09:00 EUR Retail sales in the Eurozone
Retail sales is the main indicator of consumer spending showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Forecast for April: +0.1% (-1.5% yoy) vs. -0.8% (-3.0% yoy) in March, +0.3% (-2.3% yoy) yoy) in February, -2.7% (-2.8% yoy) in January, +0.8% (-2.5% yoy) in December, -1.8% (-2 .6% YoY) in November, +0.4% (0% YoY) in September, -0.3% (-1.4% YoY) in August, +0.3% (- 1.2% YoY) in July, -1.2% (-3.2% YoY) in June, +0.2% (+0.4% YoY) in May, -1, 3% (+4.0% YoY) in April, -0.4% (+1.6% YoY) in March, +0.3% (+5.0% YoY) in February , +0.2% (+7.8% yoy) in January. The data suggests that retail sales have not yet reached pre-coronavirus levels after a sharp drop in March-April 2020, when tight lockdown measures were in place in Europe. However, better-than-expected data is likely to have a positive impact on the euro.
12:30 USD Average hourly wages. Non-Farm Payrolls. Unemployment rate
These are the most important indicators of the state of the labor market in the US in April. Forecast: +0.4% (against +0.3% in March, +0.2% in February, +0.3% in January and December, +0.6% in November, +0.4% in October , +0.3% in September and August, +0.5% in July, +0.3% in June, May and April, +0.4% in March, 0% in February, +0.7% in January 2022, +0.6% in December, +0.3% in November, +0.4% in October, +0.6% in September and August 2021) / +0.181 million (against +0.236 million in March, +0.311 million in February, +0.517 million in January, +0.233 million in December, +0.263 million in November, +0.261 million in October, +0.263 million in September, +0.315 in August, +0.528 million in July, +0.372 million in June, +0.390 million in May, +0.428 million in April, +0.431 million, +0.678 million in February, +0.467 million in January 2022, +0.199 million in December, +0.210 million in November, +0.531 million in October, +0.194 million in September, +0.235 million in August 2021) / 3.5% (against 3.5% in March, 3.6% in February, 3.4% in January, 3.5% in December, 3.7% in November and October, 3.5% in September, 3.7% in August, 3.5% in July, 3.6% in June, May, April and March, 3.8% in February, 4.0% in January 2022, 3.9% in December, 4.2% in November, 4.6% in October, 4.8% in September, 5.2% in August 2021), respectively.
In general, the figures can be described as encouraging. Nevertheless, it is often difficult to predict the market reaction to the publication of indicators, because many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, because the economic situation in the US and many other major economies remains controversial, with increased risks of recession and high inflation. In any case, when the data from the US labor market is published, a surge in volatility is expected in trading not only in the USD, but throughout the financial market. Probably the most cautious investors will prefer to stay out of the market during this period of time.
12:30 CAD Unemployment rate in Canada
Statistics Canada is to publish data on the country’s labor market for January. Unemployment has risen in Canada in recent months, partly amid massive coronavirus-related business closures and layoffs. Unemployment rose from the usual 5.6% – 5.7% to 7.8% in March and to 13.7% in May 2020. If unemployment continues to rise, the Canadian dollar will decline. If the data turns out to be better than the previous value, the Canadian dollar will strengthen. Decreasing unemployment rate is a positive factor for the CAD, rising unemployment is a negative factor. In March 2023, unemployment was at 5.0% (against 5.0% in February and January, December, 5.1% in November, 5.2% in October and September, 5.4% in August, 4, 9% in July and June, 5.1% in May, 5.2% in April, 5.3% in March, 5.5% in February, 6.5% in January 2022). Forecast for April 2023: 5.0%.
Price chart of EURUSD in real time mode
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