Indeed the last week came up with surprises causing sharp movements in the market — especially the announcement of British Prime Minister Theresa May backing down. On Friday, the Greenback dropped from a two-year high versus a basket of major currencies after orders for US-made capital goods disappointed. That gives us further proof that manufacturing and the broader economy are lagging, due in part to the US-China trade dispute.
Looking ahead to the coming week, the economic calendar is offering a few top-tier catalysts which may help us determine further trends of the market. Ready to dig deeper?
Top 5 Economic Events This Week
On Monday, most of the markets will remain closed in the observance of the Spring Bank Holiday in the United Kingdom and Memorial Day in the United States. The volatility may remain thin, so will the trading activities.
1) CB Consumer Confidence – Tuesday, 14:00 GMT
Consumer confidence is expected to be 130.1 in May, slightly up from a 129.2 version in April. It seems to cross the 17-year high of 130.0 in the month of February. It will be monitored at 14:00 GMT on Tuesday.
Why Consumer Confidence Matters
Financial confidence or consumer confidence is a leading indicator of consumer spending which accounts for a majority of overall economic activity. For instance, you will spend more only if you are confident about your job or business. It’s pretty logical to say better than expected data is considered suitable for the economy.
2) Bank of Canada Monetary Policy Decision – Wednesday, 14:00 GMT
The BOC has been one of the few central banks amongst liberal economies (apart from US Federal Reserve) that’s been able to raise interest rates despite the crises and trade war. The Bank of Canada has increased rates four times since 2017 and but haven’t changed ever since Oct 2018.
What are the chances of a rate hike?
The Bank of Canada will make its next overnight rate decision on May 29, with seven specialists surveyed by online financial comparison site, Finder, anticipating the Bank will keep interest rate steady at 1.75%. Therefore, no rate hike sentiments are likely to keep the Canadian dollar under pressure.
3) US Prelim GDP q/q – Thursday, 12:30 GMT
On Monday, the United States will get off to a quiet start as the banks will be closed on for Memorial Day. However, the data will start flowing in on Tuesday with housing figures probably bringing some interest if there’s any sudden weakness in either the official or the S&P CoreLogic Case-Shiller home price index for March.
However, the spotlight will be on the US Preliminary GDP growth in the first quarter. The preliminary GDP had shown the US economy grown by 3.2% rate vs. 3.6% forecast in Q1. For now, economists are predicting a small downward correction to 3.1% in the second print.
4) Chinese Manufacturing & Services PMI – Friday, 1:00 GMT
These are a leading indicator of economic health as businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy.
The PMI numbers from China will also be relevant for the risk-sensitive Australian dollar as any weakness in the manufacturing PMIs on Friday would hurt the market at a time when the global outlook is already deteriorating from a worsening trade war. Chinese manufacturing PMI came out better than expected, rising from 50.5 to 50.1 in April. However, a drop of 49.9 is on the cards for now.
5 – Canadian GDP m/m
Canada’s first-quarter GDP release won’t be particularly interesting until we see upbeat figures vs. what we saw in the final quarter of last year.
However, there are likely to be few concerns in and around the report which may include:
1) Since the second quarter of 2016, the Canadian trade deficit is the widest.
2) The manufacturing PMI broke below the critical 50-threshold in April, dropping into recession territory
3) Construction starts moved down 9.9% in Q1 2019, which implies that we aren’t yet out of the housing market slowdown.
On Friday, first-quarter GDP estimates will be crucial in supporting policymakers conclude whether the economy is on the mend from the soft patch encountered at the end of 2018.
All the best, and let’s get ready for another profitable week!