Weekly trading forecast April 29 - May 3.

Global financial markets could continue the aggressive post-Easter price action this week, and the price action would be decisive for most of the financial instruments, especially for the US dollar. Two primary drivers are expected whether to support the greenback’s strength or turn it back south. First, the US Federal Reserve will gather for the interest rates decision and financial statement this Wednesday. Second, the traders and investors will stick to the US Non-Farm Payrolls report as one of the most important indicators of economic growth. In other regions, European and Canadian GDP reports are expected to bring light on events happening in local economies. Emerging markets players will watch the Chinese data in order to make a conclusion about the economic expansion of the second largest world’s economy. The Bank of England is expected to stay pat on the interest rates, while the split in the vote should determine the faith of the Sterling. The New Zealand dollar will also be in the market’s focus as the labour market will release unemployment data.

Monday

The trading week should kick-off without Japanese traders as local exchanges will be closed for 10-day holidays. The Asian trading session is expected to be comparatively quiet as the economic calendar is empty. However, the price action might be more aggressive as some of the Asian traders would have a delayed reaction on the US GDP report released on Friday. The European trading session will begin with Italian PPI report and EU Business and Consumer Survey. The data should determine the direction for EUR/USD, and the biggest question is whether the single European currency would be able to extend gains after Friday’s recovery. British traders will listen to BoE Governor Carney in his speech about the economic growth and monetary policy prospects. On the other side of the Atlantic, US PCE deflator will be released. Traditionally, that report is even more critical for the Federal Reserve in the assessment of inflationary pressures. So far, economists expect the PCE deflator to remain unchanged at the level of 1.4%, however, new surprises might continue with a higher level of price growth in the largest world’s economy. If that happened, the US dollar might continue its bullish rally as the chances for a rate hike would grow for this year.

Tuesday

Chinese Manufacturing and Non-Manufacturing PMI report will determine the direction for emerging markets on Tuesday. The latest trade balance was much stronger-than-expected in the second largest world’s economy, and the Purchase Managers Index has enough room for a positive surprise as the expectations are quite modest. The New Zealand officials will publish Business Activity index, and NZD/USD might continue its bullish run started last Friday if the data was positive. A whole pack of crucial macroeconomic data will be released in the European Union. French GDP, German Import Price Index, GFK Consumer climate and unemployment rate, inflation figures across the Eurozone and EU Q1 GDP will be published. It’s hard to expect any optimism for EUR/USD as the recent data was disappointing. Therefore, the single European currency could continue sliding versus the US dollar on Tuesday if the data failed to convince traders in the opposite. Canadian GDP and inflation figures should show further direction for USD/CAD as the Bank of Canada was dovish last week. If that uncertainty continued weighing on the Loonie, the pair might chart a bullish breakthrough, renewing multi-month highs. BoC Governor Poloz will speak late Tuesday as well. US CB Consumer confidence should point to the Fed’s position during the interest rates decision the next day.

Wednesday

Although 14 countries will be off for holidays, Wednesday’s price action might be wild due to the importance of economic events. New Zealand employment will be the critical report of the week for NZD/USD and NZD/JPY pairs. The unemployment rate is predicted to decline in March, and that would be a positive sign for Kiwi traders. Nationwide Harmonised Price Index and Construction PMI will be released in the United Kingdom. The Sterling could have a lift from the fundamental side of things as recent data was robust. The volatility will also increase as investors will be positioned before the Bank of England’s rate decision on Thursday. US investor will monitor ADP Non-Farm employment change as the report traditionally points to the level of NFP figures coming up on Friday. US ISM Manufacturing PMI will be the last report before the FOMC will publish its verdict. Although the regulator is expected to leave the interest rates unchanged, traders will pay close attention to words in the financial statement in order to understand further steps in the monetary policy. If the Fed officials changed the dovish rhetoric, the US dollar might surge across the board as the interest rates differentials will be higher compared to other regions. Otherwise, we might see a deeper bearish retracement in the US dollar index. US crude oil inventories will be the decisive factor for WTI Crude price.

Thursday

The Chinese Caixin Manufacturing PMI will be released on Thursday. Global equities are traditionally vulnerable to that data. German Retail Sales and Manufacturing PMI reports will determine the price action for EUR/USD, while the main driver would remain the Fed for the pair. GBP/USD could face an extremely volatile trading session as the Bank of England will announce its interest rates decision. The vote split will also be crucial for the Sterling. US Factory orders and unit labour cost will be the main drivers for the greenback on Thursday.

Friday

The volatility should ease on Friday, even though several reports are scheduled to release in Australia, Switzerland, Britain and Europe. The Eurozone inflation might have the most significant impact, especially if the data came out of the expectations range. However, EU CPI is traditionally in line with the forecasts. The main event for global financial markets will be the US NFP report. The market consensus is quite active with the headline number of 181 thousand jobs added in April. That’s slightly lower than the previous figure of 196K. The US dollar will be vulnerable to higher volatility on Friday as both outcomes are still possible. If the data beat the forecast, investors could start talking about a rate hike again. Otherwise, the greenback could slide on the back of overestimated economic expectations.
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