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US GDP on Thursday, ISM Manufacturing and NFPs on Friday Highlight Week

US GDP on Thursday, ISM Manufacturing and NFPs on Friday Highlight Week

Christopher Vecchio, CFA, Senior Strategist

Much attention has been paid to the worsening growth outlooks for Asia and Europe, but a bevy of highly significant US data at the end of the week will steal the spotlight, if only momentarily. However, given recent Federal Reserve commentary, poor prints this week could prompt more quantitative easing.

05/29 Tuesday // 12:00 GMT: EUR German Consumer Price Index (MAY P)

Price pressures in Europe’s largest economy appear to be leveling off, with the preliminary May Consumer Price Index release showing little change from April’s figures. According to a Bloomberg News survey, on a monthly-basis, prices contracted by 0.1 percent in May (on an EU Harmonised adjustment, prices unchanged m/m); on a yearly-basis, the CPI was steady at 2.1 percent in May (on an EU Harmonised adjustment, prices unchanged at 2.2 percent y/y). European leaders have called for more action by the European Central Bank to help struggling periphery nations, but the key interest rate hasn’t been cut due to inflation fears in Germany. A weak print will likely support the EUR; a strong print will indicate the ECB is unlikely to adjust its policy, and is thus negative for the EUR. The key pair to watch is EURGBP.

05/31 Thursday // 12:30 GMT: USD US Gross Domestic Product (1Q S)

The second release of the first quarter headline growth reading for the United States will be disappointing. Thursday’s report is expected to show that US GDP grew at a modest 1.9 percent rate in the first quarter, down from the 2.2 percent initial reading. This comes as little surprise given the fact that two of the United States’ largest trading partners – China and the Euro-zone –faced diminishing growth prospects through the first few months of the year. In light of recent commentary by Federal Reserve officials, it is clear that a third round of quantitative easing – the program that inflates asset prices, destroys Treasury yields, and dilutes the US Dollar – is very much on the table. A weak print could prompt speculation that more QE is on the way, which will be negative for the USD; a strong print will keep the Fed on the sidelines, which will be positive for the USD. The key pair to watch is USDJPY.

06/01 Friday // 01:00 GMT: CNY Chinese PMI Manufacturing (MAY)

Chinese growth data over the past several weeks has been largely disappointing, and May’s manufacturing report will do little to ease these concerns. According to a Bloomberg News survey, the PMI Manufacturing index will come in at 51.9 from 53.3 in April. This would represent the largest one-month decline (-1.4) since November-December 2010 (-1.3). The private sector preliminary reading, the HSBC Flash PMI, came in at 48.7 for May, suggesting that a disappointment is indeed on the horizon. A weak print will be bearish the AUD and NZD; a strong print will be bullish for the AUD and NZD. The key pairs to watch are AUDJPY and NZDJPY.

06/01 Friday // 12:30 GMT: USD Nonfarm Payrolls Report and Unemployment Rate (MAY)

This is the most important event on the docket this week. After an unseasonably warm winter in which the US economy averaged job growth of 246K from December through February, jobs growth the past few months has been poor, averaging 134.5K in March and April. The seasonal backlash period appears over, with economists forecasting jobs growth of 150K in May. This would be aided by private payrolls growth of 160K. Accordingly, the Unemployment Rate is forecasted to hold at 8.1 percent. If jobs growth begins to pick back up – which is likely given recent weekly and monthly labor market releases – then the Federal Reserve is likely to move away from another QE package. A key aspect of the report to watch is the participation rate, which currently sits at a three-decade low. A weak print could prompt speculation that more QE is on the way, which will be negative for the USD; a strong print will keep the Fed on the sidelines, which will be positive for the USD. The key pair to watch is USDJPY.

06/01 Friday // 14:00 GMT: USD ISM Manufacturing Report (MAY)

Manufacturing activity in the United States continued to expand in May, according the estimates provided by Bloomberg News. According to a survey, the ISM Manufacturing index for May showed expansion at 53.8, but below the April reading of 54.8. A reading over 50.0 signals growth; thus, May’s report should show growth albeit at a slower rate. Still, this would represent the third consecutive reading above 53.0, a series that hasn’t occurred since April-June 2011, when the index showed prints of 59.7 (April), 54.2 (May), and 55.8 (June). In light of recent commentary by Federal Reserve officials, it is clear that a third round of quantitative easing – the program that inflates asset prices, destroys Treasury yields, and dilutes the US Dollar – is very much on the table. A weak print could prompt speculation that more QE is on the way, which will be negative for the USD; a strong print will keep the Fed on the sidelines, which will be positive for the USD. The key pair to watch is USDJPY.

Rate Hike Probabilities / Basis-Points Expectations

US_GDP_on_Thursday_ISM_Manufacturing_and_NFPs_on_Friday_Highlight_Week_body_Picture_1.png, US GDP on Thursday, ISM Manufacturing and NFPs on Friday Highlight Week

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to cvecchio@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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