The greenback continued to extend its gains as bond yields soared. The dollar index, that measures the greenback strength against a basket of 6 major currencies, remained steady at $93.491, after hitting the highest level for the year earlier this week at $93.632. Is it likely to continue its bullish trend? Well, the week is fully packed with market-moving economic events, with the U.S. FOMC & Existing Home Sales topping the list. I must say, these fundamentals are too good to miss…

Watchlist – Top Economic Events This Week

Monday – May 21

On Monday, the market may exhibit thin trading volume as most of the European markets will remain closed in the observance of Whit Monday.

US Dollar – USD

FOMC Member Bostic is due to speak about the economic outlook and price-level targeting at the Atlanta Economics Club at 15:30 (GMT). The speech is likely to catch attention as Federal Reserve FOMC members vote on where to set the nation’s key interest rates and their public engagement is often used to drop subtle clues regarding future monetary policy.

Tuesday – May 22

Great Britain Pound – GBP

Inflation Report Hearings – At 9:00 (GMT), the BOE Governor and several MPC members will testify on inflation and the economic outlook before Parliament’s Treasury Committee. As we know, the U.K. inflation fell more than expected to 2.5% in March, lowering expectations for a rate hike. Core CPI is projected to slow from 2.3% to 2.2%. Let’s see what Mario Draghi has to say about it. The expectations of another slowdown will put Sterling in trouble.  

Wednesday – May 23

Great Britain Pound – GBP

CPI y/y –  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 CPI slowed down to an annual pace of 2.5% from 2.7%, yet in between 1-3% range mandated by the BOE (Bank of England). As per economists forecast, inflation is expected to remain at 2.5% in May.

U.S. Dollar – USD

FOMC Meeting Minutes – For all the newbies out there, it’s a detailed record of the FOMC’s most recent meeting, providing in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates. At 18:00 (GMT), the Federal Reserve will be publishing minutes from its meeting in early May when it decided to leave the interest rate unchanged. In the current FOMC minutes, traders will be expecting to hear about June’s rate hike which I believe is already priced in.

Fellows, the dollar can face strong selling pressure in case FOMC fails to communicate about June rate hike.

Thursday – May 24

Today’s main event is the monetary policy accounts from the ECB’s latest meeting in April. From the UK, retail sales are due and in Germany, revised Q1 GDP data is also released.

Great Britain Pound – GBP

BOE Gov Carney is due to deliver opening remarks at the BOE’s Markets Forum, in London at 8:00 (GMT). Investors won’t be expecting him to speak about next policy decision yet. Any surprising remarks from him will cause fluctuations in the market.

Retail Sales m/m– The Office for National Statistics is due to release the retail sales data at 8:30 (GMT). It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. In April, the retail sales fell by -1.2% vs. the forecast of -0.5% weighting the interest rate hike sentiments.

This month, economists are expecting a 0.8% rise in retail sales. A higher number of sales indicate a higher inflation and growing economy. So, the positive data will be good for the Sterling.

Eurozone – EUR

ECB Monetary Policy Meeting Accounts – Recalling the recent policy meeting, the European Central Bank did not make any change to its policies. In fact, the ECB President Mario Draghi sort of acknowledged the economic slowdown and named it as a temporary factor.

The current meeting minutes will present a look into the discussions within the Governing Council. All we need to see is, what they are expecting to do, considering the recent worries over the economic slowdown. Any remarks on tapering the QE (Quantitive program) and the next rate hike (which is expected next year in 2019) will help us drive further trends in euro.  

Friday – May 25

Great Britain Pound – GBP

Second Estimate GDP q/q – At 8:30 (GMT), you should see the GDP data which is forecasted to remain unchanged at 0.1% as the British economy grew at a slower pace in 2018.

Especially, after the downbeat inflationary assessment by Mark Carney & team, we can expect a drop in GDP figure. Sterling is under heavy selling pressure as the BOE Gov Mark Carney hasn’t said much about the next rate hike. In fact, the rate hike sentiments are falling apart, causing bearishness in the pound. Anyways, a slight divergence in the data can cause a huge movement in the Cable.

US Dollar – USD

Core Durable Goods Orders m/m – Besides U.K’s GDP, we must watch Core Durable Goods Orders at 12:30 (GMT). It’s an economic indicator that measures the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items. The orders are expected to gain by 0.5% which is higher than 0.1% gain in April 2018.

Looking at the past four months history, the core durable good has shown much deviation from its forecast and previous figures which is actually very good from the trading point of view. The more it deviates, the more we have chances to capture the price fluctuations.

Fed Chair Powell and BOE Governor Carney, both are due to participate in a panel discussion titled “The future of central banking?” at the Sveriges Riksbank Anniversary Conference, in Stockholm at 13:20 (GMT). The event may have muted impact on the market.

Summing Up – This week bit boring due to lack of top-tier catalysts, but the week ahead is going to exciting with a large number of economic events. So, brace yourself for volatility and also check out FX Leaders News Trading Strategy for a better understanding of the fundamentals.

Have an awesome weekend.