Market OutlookEuro Under Pressure

With remaining data yet to be published, Euro and Eurozone are facing tough times ahead with the virus that affected the whole bloc. What’s the way forward for the Euro and the Majors this week?

USD – Trump Hurting His Re-Election Campaign

The US dollar traded higher last week on a considerably mixed picture overall. COVID-19 data did not show any signs of easing. Ongoing protests in many states led to Donald Trump himself calling for the lockdown to end. The president’s handling of the crisis has seen his approval rating drop from above 50% to below 45%. Any news that points to Trump not getting a second term will be cheered by the US dollar.

It’s a relatively busy week ahead for the greenback. Following last week’s IMF forecasts, economic data is making the headlines. Last week the IMF forecast that global growth would fall by 3% in 2020. This could create a global recession not seen in a lifetime.

We can expect that preliminary private sector PMI numbers for April to have the most significant impact. PMIs due out on Thursday as these numbers now cater for April.

Private sector activity expanded in March, but the numbers for April might paint different picture. Market expectations are for a fall 42.8 from 48.5 in March.

The weekly jobless claims figures on Thursday will also influence. Expectations see the number of Americans claiming unemployment benefit to increase by over 4 million. From the housing sector, existing home and new home sales figures for March might not reflect the impact of COVID-19. Mortgage applications began to fall late in March, which suggests that April numbers will be of greater relevance.

Earnings season will be another reason why we could see some added volatility on the greenback. This week sees earnings from 3 of the FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) Netflix, Alphabet, and Amazon. These are such heavyweights that weaker than expected numbers would have a material effect on the US dollar.

Euro – Finance Ministers Continue Shambolic Handling of the Crisis

As Spain and Italy begin to ease lockdown measures, the Euro and the Eurogroup remain in fight to save the economy. The health crisis is now starting to relax. However, it’s the slow but crucial process of letting many get back to their normal lives. Governments are stuck between the need to get economies up and running, and not instigating a spike in infections by allowing too many people out too early.

It’s a busy week ahead on the economic data front. During the first days of the week, the focus will be on April’s economic sentiment figures for Germany and the Eurozone. The ZEW numbers will reflect economist and analyst sentiment following the March dive in optimism.

The Eurozone’s consumer confidence figure for April, on Wednesday, will also garner plenty of attention. Of course, we expect to see these numbers weaker than would be of no surprise to many.

In the second half of the week, the focus will then shift to preliminary April private sector PMI numbers for much of Europe.

The French, German and Eurozone numbers will likely reflect a quicker pace of contraction than other areas. If this is the case, we could see the Euro come under immense pressure. There are already calls for the ECB, and Eurozone finance ministers to provide more in the way of financial help. But yet again, agreement on a fiscal stimulus is the problem. Should the EU and ECB fail to deliver more support, the Euro will feel the full force of selling pressure.

From Germany, consumer and business confidence figures for May and April will also be in focus. We would expect the PMI numbers to be the key driver, and it will shed more light on the Euro.

GBP – UK Unemployment Due as Boris Eyes a Return to Work

It was a mixed week for the Pound. A somewhat positive week was punctuated by the UK Government to extend the lockdown for a further 3 weeks officially.

Through the first half of the week, employment and inflation figures are in focus.

We would expect March inflation and claimant count figures to have the most considerable influence. It’s unlikely, however, that the full impact of the Coronavirus will be reflected in the numbers. Expectations are pointing to the unemployment rate dropping from 3.9% to 3.8%. This fact should limit any upside if the numbers come in better than expected.

In the second half of the week, the focus will shift to March retail sales and April private sector PMI numbers.

We can expect retail sales to garner the most attention, but with no expectations, it’s hard to gauge. There would be little support from any positive retail sales figures.

Outside of the numbers, any chatter on Brexit and fiscal policy will also need consideration, however this not expected. The markets will be wanting to know when the British PM will be back behind the desk. There is also the issue of Britain’s transition period to consider. However, it seems that any Brexit headlines are a long way off and would certainly not gauge the public mood.

CAD – Tumbling Oil Prices Giving Mixed Messages

WTI crude oil futures prices decreased by 6.7% on Friday while Brent crude dropped -8.4%. Still, the Canadian Dollar rose against other Majors on Friday after suffering losses last week. 

Crumbling oil prices might have a role in last week’s early losses for the Loonie. At the same time, CAD was also weighed down on Wednesday when the Bank of Canada (BoC) expanded its quantitative easing programme. However, it made progress against Sterling as well as the U.S. Dollar, which has left it appearing poised for more gains over both currencies. 

It’s a relatively busy week ahead. February retail sales and March inflation figures are out on Tuesday and Wednesday.

We would expect the inflation figures to have a more significant impact, though weak retail sales numbers could test support. March and April numbers will likely be far worse, so weak numbers in February would point to dire numbers ahead.

February wholesale sales and March new house price figures should have a muted impact on the Loonie. Outside of the numbers, expect market risk sentiment and outlook towards crude oil supply and demand also to influence.

AUD – Quiet Week Ahead as Oil Drags

It’s a particularly quiet week ahead, with no material stats for the markets to consider. A lack of data leaves the focus on the RBA minutes due out on Tuesday.

The RBA minutes have tended to be on the more dovish side of late. There’s certainly little reason for the RBA to be anything but dovish for now. Private sector PMIs from key economies and commodity prices will also influence in the week.

Oil prices fell off a cliff last week with the OPEC+ agreement out. The outlook for this week could see a degree of trading instigated buying, but that would only be short-lived. It seems there has to be a concerted effort from oil-producing nations to do more to help get the oil price higher. WTI crude oil is trading at around $15 per barrel.

NZD – Kiwi Awaits US Sentiment and Jobs Data

It’s also a quiet week ahead on the economic data front. Financial data is limited to first-quarter inflation figures. While any softer inflation numbers are Kiwi negative, market risk appetite will remain the key driver.

The RBNZ has already spoken of a willingness to provide further support. Following the IMF forecasts, the RBNZ may well be back in the spotlight in the early summer. This should limit any major upside.

Much of the attention will be on the outlook in the US, and on the important remaining global economic data. The US and more specifically, Trump’s handling of the crisis will be a big focus. Pressure mounts on the current administration. Into an election year, Trump’s handling of the crisis will be a major factor for voters. His chaotic press conferences might be negative for his approval rating that has already fallen sharply in the last few weeks.