Dollar Begins to Drop - What's Next?

May 14 – 18: Economic Events Outlook – Dollar Slips After A Bullish Run-Up

Posted Saturday, May 12, 2018 by
Arslan Butt • 4 min read

What’s up, traders.
The U.S. dollar enjoyed massive demand until Wednesday, amid better than expected unemployment rate and rising Treasury Yields. But, the greenback plunged dramatically to end the week in losses, especially on the release of a softer U.S. consumer inflation report and a slight drop in Treasury Yields. Although, the greenback was massively overbought and investors were looking for a reason to initiate profit takings. What’s next? Let’s take a look at key economic events to watch this week…

Watchlist – Top Economic Events This Week


Monday – May 14

On Monday, the volatility may remain low in the absence of major catalysts, however, the speeches from central bank officials will remain in check.

U.S. Dollar – USD

FOMC Member Mester is due to speak at the Central Banking Series hosted jointly by the Global Interdependence Center and the Bank of France, in Paris at 6:45 (GMT). The odds of fluctuations remains high as Mester is also expected to take audience questions.


Australian Dollar – AUD
Likewise, the RBA Assist Governor Debelle is also scheduled to deliver a speech titled “The Outlook for the Australian Economy” at the Chief Financial Officers Forum, in Sydney at 23:10 (GMT). It’s likely to have a muted impact on the market.

Tuesday – May 15


Australian Dollar – AUD

Monetary Policy Meeting Minutes – At 1:30 (GMT), the Reserve Bank of Australia is expected to release the monetary policy minutes. If you recall, RBA shared its concerns over the rate of wage growth surrounding rising debt levels in its April statement. However, RBA Lowe failed to share anything new.

If RBA does the same in their meeting minutes, then you are likely to see a muted impact on Australian currency pairs. Investors will be focusing on other catalysts to predict the direction of Aussie pairs.


Eurozone – EUR

German Prelim GDP q/q – During the European hours at 6:00 (GMT), the investors will be monitoring the German GDP figures for the Q1 of 2018. Destatis is anticipated to exhibit a slower economic growth, with output in the Eurozone’s top economy scoring 0.4%. The GDP is down from the 0.6% increase in the preceding period.

Traders, the slower growth in the economy will put pressure on the ECB president Mario Draghi to keep the accommodative monetary policy.


German ZEW Economic Sentiment – The Zentrum für Europäische Wirtschaftsforschung will release the data at 9:00 (GMT). The data is expected to drop to -8 vs. -8.2. Fellows, it’s a survey of about 300 German institutional investors and analysts which asks respondents to rate the relative 6-month economic outlook for Germany. The figure used to be in the range of 15 – 20 before April. But it’s pretty clear that German’s institutional investors are losing confidence in the economy. So, that’s another reason to expect a continuation of bearish sentiment in Euro. Do check FX Leaders Strategy on Trading the Market Sentiment for predicting moves in advance.


Great Britain Pound – GBP

Average Earnings Index 3m/y – It’s a leading indicator of consumer inflation and shows a change in price for businesses and the government pay for labor, including bonuses. Simply, when businesses pay more for labor the higher costs are usually passed on to the consumer which leads to inflation.

The UK’s Office for National Statistics reported 2.8% average earnings in April, whereas, economists are expected a drop to 2.7% this month.


Unemployment Report
For all the newbies, it’s one of the most eyed economic data as it shows a change in the number of people claiming unemployment-related benefits during the previous month. The recent jobs report is expected to be disappointing. Jobless claims are expected to rise by 13.3K, worse than 11.6K in April. Certainly, the bigger number shows slacks in the labor market and it will pressure BOE to keep the rates unchanged to 0.50%.

Whereas, the unemployment rate is expected to remain unchanged at 4.2%.


US Dollar – USD

Retail Sales m/m – The Census Bureau is due to release the retail sales data at 12:30 (GMT). It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. In March, the retail sales fell grew by 0.2% vs. the forecast of 0.4%.

This month, economists are expecting a 0.5% rise in retail sales and 0.4% rise in core retail sales. A higher number of sales indicate a higher inflation and growing economy. So, the positive data will be good for the greenback.


Wednesday – May 16


Eurozone – EUR

Final CPI y/y – As we know, the inflation shows a change in the price of goods and services purchased by consumers. It looks like the UK is struggling with inflation. In April, the final CPI slowed down to an annual pace of 1.3%, yet in between 1-3% range mandated by the ECB (European Central Bank). As per economists’ forecast, inflation is expected to remain at 1.2% this month.


U.S. Dollar – USD

Building Permits m/m – The Census Bureau will be there to release the building permits. It’s an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building. Inevitably, we only invest in capital assets when the economic activities are on track. As per economists forecast, the building permits are likely to remain unchanged at 1.35M.


Thursday- May 17


Australian Dollar – AUD

Labor Market Report – On Thursday, the only major event is the Australian labor market data. At 12:30 (GMT), the Australian Bureau of Statistics will release the employment change with a strong forecast of positive 20.3K vs. 4.9K. Alongside, the unemployment rate is expected to remain unchanged at 5.5%.

Fellows, both of the economic events are forecasted to be positive and can extend support to the Aussie.


Friday – May 18


Canadian Dollar – CAD

Core Retail Sales m/m – The figure shows a change in the total value of sales at the retail level, excluding automobiles. Simply, a higher number of retail sales signals a growth in the economy. The Statistics Canada is due to release the figure at 12:30 (GMT). It looks like the Canadian retail sales are struggling this year as it plunged to -1.8% in Feb and showed 0% gain in April. Let’s see what we get this month.


CPI m/m – Likewise, the Canadian inflation is also suffering lately despite the improved crude oil prices. In April, the CPI figure came out at 0.3% down beating the 0.4% forecast, putting pressure on the BOC (Bank of Canada) to keep the interest rates on hold.


That’s pretty much it for now, brace yourself for volatility and also check out FX Leaders News Trading Strategy for a better understanding of the fundamentals. Have a profitable week ahead.

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