Two major central banks are due to announce interest rates decisions and economic statements, updating monetary policy prospects in Australia and the European Union. Several rulers of other central banks, including Fed Chair Powell, BoE Head Carney and BoJ Governor Kuroda, will speak this upcoming week. Purchase Managers Indexes will be published across the globe, while employment figures in the United States and Canada might bring significant shifts in recent trends in the financial markets. However, economic influence on price action might be limited as global investors will keep following headlines regarding trade wars and tensions escalations between the two largest world’s economies, as well as in the North American region. Oil speculators would hope for WTI and Brent Crude prices’ recovery after 10% plunge last week, but that scenario would depend on general risk appetite and safe-haven flows. The fixed-income markets will monitor the situation with U.S. 10-year Treasury yields, which dropped to lowest levels in 18 months last week. ECB’s updates on the TLTRO programme should bring some light on the volume of additional liquidity in the Eurozone, which could affect global bonds getting even cheaper. In general, the first trading week of summer vacation season promises to keep the volatile tendency despite the potentially lower trading volume and thin trading conditions. Investors’ nervousness could send global stock indices lower, entering a long-term bear market.
New Zealand is off for Queen’s Birthday Holiday on Monday, and NZD/USD could be stuck in a tight range, while the rest of the financial markets should work as scheduled. Australian data is essential for the RBA’s meeting later this week, therefore, higher volatility could be seen for AUD/USD and AUD/JPY currency pairs. AIG Manufacturing Index is the headline report, while Company Gross Operating Profits figure is also important. The Bank of Japan will release Capital Spending in May, which is predicted to slow down to 2.6% compared to 5.7% previously. If confirmed, USD/JPY could drop below 108.00 support. Caixin Manufacturing PMI report opens a series of China’s data, which is expected to confirm potential recession in the second largest world’s economy. So far, analysts predict the figure to slightly decrease to 50.0 points from 50.2 points in April. The European trading session will kick off with Spanish, Italian, French, German and EU Manufacturing PMI. A mixed data is widely anticipated with both sides for EUR/USD to go depending on the general market’s reaction. Given the recent weakness in the Eurozone’s business and investment activity, it's hard to expect PMIs to recover significantly. Therefore, the Single European currency is vulnerable to further slide versus the greenback in the light of the upcoming ECB meeting later this week. ISM institute’s Manufacturing PMI will influence the price action in the United States not only for greenback but also for stock indices.
Australian Retail Sales report is the last data before the RBA meeting and rate decision on Tuesday. April’s figure is expected to come in slightly lower than in March - 0.2% (vs 0.3% previously). The Aussie could get temporary support if the data were stronger-than-expected. However, the market players priced in 93% of chances for the regulator to cut the interest rates in this meeting, and further price action will depend on RBA’s rhetoric in the economic statement. If another ease was announced in July or August, then AUD/USD would breach the tight consolidation range to the bottom side of it (which is most likely). Otherwise, if the regulator expressed cautiousness to have a break in supportive measures, then the Australian dollar might rally. Construction PMI will affect the British Pound in London session, while EU CPI is the main event for Tuesday. Latest data from leading European currencies, including Germany and France, showed that inflationary pressure eased somewhat. Therefore, most of the economists predict EU CPI to slow down to 1.3% year-over-year compared to the previous reading of 1.7%. If that confirmed, Draghi and company will get a green light for further softening of the financial conditions, and EUR/USD could keep weakening towards 1.1000 support. RBA Governor Lowe will speak right after that, having a delayed press conference after the rate decision in order to see the initial market’s reaction. U.S. Federal Reserve Chairman Powell is due to speak at 02:45 PM GMT, preventing sharp reaction of the greenback on monetary policy decisions overseas. Traders and investors will also watch the factory orders report at 10:00 AM NY time.
Australian GDP should end up the series of essential events for the Aussie. It’s tough to predict the market’s sentiment as crucial factors will be already known before the GDP report release. However, economists agree on weak figures for the country. European Services PMI and Retail Sales updates are going to affect the price action for Euro cross-rates, but the impact might be limited as investors will be waiting for the ECB meeting next day. U.S. ADP Non-farm Employment change will show the potential direction of the Labour market, and Markit Composite PMI could affect the U.S stock indices’ course. Wednesday traditionally changes the trends’ directions in recent weeks, so a surprise from politicians might turn things upside down. Traders should follow headlines to keep hands on the market pulse.
Thursday will start with the Q1 GDP revision in Europe 3 hours before the ECB meeting; a flat reading is widely anticipated. The regulator will announce its rate decision at 12:45 PM GMT, while the press conference is scheduled for 01:30 PM GMT. Although the market consensus is for an unchanged verdict, the volatility should jump during these hours as traders will try to guess the ECB’s intentions from the economic statement. Traders will listen to Mario Draghi carefully, especially in the part about the TLTRO programme's volume, which has to be updated. Although the single European currency remained much oversold recently, a further slide is likely as ECB got nothing but to soften the financial conditions, trying to support local exporters in the scope of global trade wars. Canadian trade Balance could affect the USD/CAD currency pair on Thursday, while the main event of the day is Ivey PMI. The U.S. calendar is empty, therefore American traders will stick to events happening on the other side of the Atlantic.
Friday is a holiday in China; Japan will publish Household spending report; the Bank of Japan Governor Kuroda will host a press conference in Tokyo. Swiss unemployment rate could shift the focus for USD/CHF, while EU traders will monitor German trade balance and industrial production reports, as well as French exports and imports data. But the real volatility will come back to markets during the NY open as the ling of all fundamental events will grab traders’ attention. U.S. Non-Farm Payrolls report is expected to decline to 183K versus 263K in the previous month, while Average Hourly Earnings and Unemployment rate are predicted to remain flat. However, recent data was weak in the United States, and the labour market could have reacted on that by the lower number of new jobs created. If the NFP healding figure slid below 150K, that would be the last nail to the coffin of the bull market for equities, and U.S. stock indices might enter in a long-term corrective phase this summer. On the other side, a better-than-expected reading would help the greenback and stock indices to recover some of the previous losses, while 10-year Treasury yields could come back to year’s average value.