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Thin Economic Calendar Might Restrict This Week’s Market Move

Upbeat Factory Orders and higher than revised down Earnings report, coupled with hawkish comments from New York Federal Reserve President, William Dudley, helped the US Dollar to shrug off the six month low NFP and helped the greenback index (I.USDX) to mark first week of May on a positive side. The EUR remained mostly negative with absence of major economic data-points while the GBP dropped on disappointing readings from headline PMIs. Moreover, the JPY also weakened against majority of its counterparts as inactivity due to three day holidays at Japanese markets curbed the currency while commodity currencies plunged heavily with weaker Crude prices and pessimistic economics. Amongst which, CAD and the AUD were badly hit as RBA cut its benchmark interest-rate to the record low while news of Canada's destructive wildfire damaged the CAD. Moving on, weekend news of Chinese Trade Balance also provided additional weakness to commodities and global industrial producers as the dragon nation's imports slumped more than 10%.

As compared to last week's heavily filled economic calendar, the current week has fewer data-points/events to offer. However, some of the notable releases, like BoE's Quarterly Inflation Report (QIR) and the RBNZ's Financial Stability Report, together with US Retail Sales and PPI, could provide intermediate trading opportunities to market players. Let's have a look at these details.

USD Traders Would Observe Retail Sales & PPI To Justify Greenback's Recent Up-move

Even if upbeat wage details and Factory Orders rejuvenated speculations of June rate-hike by the US Federal Reserve, recently weaker headline data-points, like NFP, Manufacturing and GDP, forces USD traders to closely observe Friday's monthly releases of Retail Sales and PPI.

Alike all other top-tier US details, the Retail Sales and PPI also printed sluggish numbers during their April announcement by being at -0.3% and -0.1% respectively. Forecasts relating to this week's outcome indicate another -0.3% mark by the Retail Sales while the Core reading is expected to mark nine-months high. Moreover, the PPI is also likely to reverse its prior losses with five month highs of 0.3%, with Core PPI consensus signaling three month high of +0.1% against -0.1% prior. In addition to these numbers, May month Preliminary UoM Consumer Sentiment, also out for Friday, and Thursday's weekly Jobless Claims offer some more data-flow to observe. The consumer sentiment gauge is likely marking 89.9 number against the revised down previous release of 89.00 while Jobless Claims might extend its recent up-move towards two month highs with 277K versus 274K prior.

Given the scheduled stats fail to print above the mark numbers, chances are higher that investors might avoid digesting recent raft of disappointing data-points and can call for another downward trajectory of the US Dollar.

On the contrary, positive readings might only serve as an intermediate relief for the greenback ahead of next week's headline CPI, which could signal whether the Fed actually has a room for two rate-hikes a year or not.

GDP Numbers To Portray EUR Trend

Following last week's empty calendar, preliminary GDP numbers for Q1 2016 from Germany and EU, up for Friday, become important for the EUR traders. While Germany is expected to register the strongest quarter in previous five, with 0.6% number against 0.3% prior, the EU GDP is likely holding the same 0.6% growth rate. Considering the recent pessimism at the ECB, a weaker growth number could add another push to the central banker towards extra loose monetary policy, which in-turn can result in further downside by the regional currency.

"Super Thursday" On GBP Traders' Radar

While recently published poor UK details magnified concerns that uncertainty over the looming EU referendum in June continues hurting the Britain, the BoE's QIR, coupled with monetary policy outcome, on Thursday, becomes unarguably a big event to foresee near-term GBP trend.

Although the central bank (BoE) isn't expected to alter its present monetary policy, market players would closely examine its quarterly inflation and growth forecasts together with seeking any cues of economic impact due to "Brexit". The BoE did cut down near-term inflation and growth predictions in February and the Governor also pointed towards the macro uncertainty to be the reason for the bank's present status-quo decision.

Should there be a mention of Brexit hurting the present state of UK, which actually is, coupled with another downward revision to inflation and growth forecasts, chances of the GBP's extended southward trajectory can't be denied. However, hawkish comments from the central bank Governor, which is more likely out of his nature, can provide a bit of relief to the Britain's currency.

In addition to the central bank's announcement, monthly reading of UK Manufacturing Production, up for Wednesday, becomes another reading for the GBP traders to observe. The Manufacturing gauge is likely reversing its prior -1.1% losses with +0.4% gain, which, if meeting the forecasts, can provide a sigh of relief to the GBP traders ahead of the "Super Thursday".

New-Zealand & Chinese Details To Observe

While BoE and US Retail Sales can take the center-stage of market attention, Chinese Inflation numbers and a bi-annual Financial Stability Report from Reserve Bank of New-Zealand (RBNZ), on Tuesday, followed by monthly Industrial Production from China, up for Saturday, are some other important data-points/events that also become important to observe.

After the Reserve Bank of Australia (RBA) cut its benchmark interest-rate during last week, its New-Zealand counterpart (RBNZ) might also opt for some hints towards further monetary easing during its Financial Stability Report as one of the big global commodity user, China, is still suffering from economic backlog. Further, quarterly release of New-Zealand Retail Sales, scheduled for Thursday, might also become a deterrent factor for the Kiwi (as the NZD is nicknamed) to trigger downside as it is expected to mark 1.0% growth against 1.2% prior gain.

If the central banker reveals its favor for further monetary easing, or go a step ahead and announce exact timing on which it would announce another rate-cut, the NZD become vulnerable enough to liquidate its recent gains.

Having witnessed recent improvements in Chinese Manufacturing numbers and noted the drop in Import details, headline inflation readings, namely CPI and PPI, followed by the Industrial Production, become more important for commodity traders. While the CPI is likely remaining unchanged at 2.3%, the PPI is expected to mark -3.8% versus -4.3% prior and the Industrial Production is likely registering slower growth of 6.5% from 6.8% previous. Following recent improvement in Chinese details, except Trade balance, an upbeat Industrial Production and CPI might help the commodity basket, which in-turn can favor the AUD, NZD and CAD; however, another round of downbeat readings can provide greater weakness to these trading instruments.

Follow me on twitter to discuss latest markets events @Fx_Anil

Tuesday, 10 May, 2016 / 4:38

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