Review of the main events of the Forex economic calendar for the next trading week (22.05.2023 – 28.05.2023)
Despite Friday’s decline, the DXY dollar index closed last week with a decent gain of about 0.8%. This was the second week in a row that the dollar and its DXY index strengthened. In total, over the past 2 weeks, it added about 2.2%, thus returning to the levels of 2 months ago.
Sales of US government bonds have stalled, because the President of the United States promised to reach an agreement between congressmen on raising the US national debt limit. Otherwise, as Biden said last week, if the US cannot pay its bills, it will be a disaster. “We are going to unite because there is no other alternative,” Biden said.
Probably, in view of this, the beginning of next week may begin with a gap in the market depending on the result achieved in the negotiations between the Democrats and the Republicans on this issue. The current size of the US national debt is 31.4 trillion dollars, and the Republicans in principle are not opposed to meeting the Democrats halfway, provided that spending is reduced.
Of the most important publications next week, market participants will pay attention to macro statistics from the US, including the publication of the minutes of the May meeting of the Fed, from Germany, the Eurozone, the UK, New Zealand, as well as the results of the meetings of the Central Banks of China and New Zealand.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, May 22
01:15 CNY People’s Bank of China interest rate decision
Since May 2012, the People’s Bank of China has been steadily lowering the interest rate to provide support to Chinese manufacturers. The last time the bank lowered the rate was in August 2022 (by 0.1% to 3.65% at the moment).
In 2020, in the context of international trade conflicts and a slowdown in the global economy, the world’s largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitiveness of goods exported from these countries.
The People’s Bank of China is also in line with this process. The depreciation of the yuan has become especially relevant in the last 4-5 years, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative consequences of increased duties on the import of Chinese goods into the United States was the depreciation of the national currency of China. Such a measure was intended, among other things, to maintain the previous volumes of imports of Chinese products to the United States, which would be cheaper for American buyers due to the difference in the exchange rates of the national currencies of the United States and China.
The coronavirus pandemic has become an additional strong negative factor.
Probably, at this meeting, the People’s Bank of China will keep the interest rate at the same level of 3.65%, although unexpected decisions are not ruled out.
If the People’s Bank of China makes unexpected statements or decisions, volatility could increase throughout the financial market. Investors will also be interested in the bank’s assessment of the consequences of the coronavirus for the Chinese economy and its policies for the near future.
Tuesday, May 23
07:30 EUR Manufacturing PMI of the German economy according to S&P Global (preliminary release). Composite PMI of the German economy according to S&P Global (preliminary release)
Manufacturing PMI is an important indicator of the business environment and the general state of the German economy. This sector of the economy forms a significant part of Germany’s GDP. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro.
Previous monthly values: 44.5, 44.7, 46.3, 47.3, 47.1, 46.2, 45.1, 47.8, 49.1, 49.3, 52.0, 54.8, 54.6, 56.9, 58.4, 59.8, 57.4, 57.4, 57.8, 58.4, 62.6, 65.9, 65.1, 64.4, 66, 2, 66.6, 60.7, 57.1, 58.3, 57.8. The growth of the indicator above the previous values will support the euro (in the short term). Data worse than the forecast and / or the previous value will have a negative impact on the euro.
Composite PMI is an important indicator of business conditions and the overall health of the German economy. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro. Previous monthly values: 54.2, 52.6, 50.7, 49.9, 49.0, 46.3, 45.1, 45.7, 46.9, 48.1, 51.3, 53.7, 54.3, 55.1, 55.6, 49.9, 52.2, 52.0, 55.5, 60.0, 62.4, 60.1, 56.2, 55.8, 57, 3, 51.1, 50.8, 52.0, 51.7. Data worse than the forecast and / or the previous value will have a negative impact on the euro.
08:00 EUR Composite Manufacturing PMI of the Eurozone economy according to S&P Global (preliminary release)
Manufacturing PMI is an important indicator of the state of the entire European economy. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro. Previous monthly values: 54.1, 53.7, 52.0, 50.3, 49.3, 47.8, 47.3, 48.1, 48.9, 49.9, 52.0, 54, 8, 55.8, 54.9, 55.5, 52.3, 53.3, 55.4, 54.2, 56.2, 59.0, 60.2, 59.5, 57.1, 53.8, 53.2, 62.5, 48.8, 47.8, 49.1, 45.3. Data worse than the forecast and / or the previous value will have a negative impact on the euro.
08:30 GBP Services PMI of the UK economy according to S&P Global (preliminary release)
Services PMI is an important indicator of the state of the British economy. The services sector employs the majority of the UK’s working-age population and contributes approximately 75% of GDP. The most important part of the services industry is still financial services. If the data turns out to be worse than the forecast and the previous value, the pound is likely to fall sharply in the short term. Data better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is considered positive and strengthens the GBP, while one below 50 is considered negative for the GBP.
Previous values of the indicator: 55.9 in April, 52.9 in March, 53.5 in February, 48.7 in January, 49.9 in December, 48.8 in November, 48.8 in October, 50.0 in September, 50.9 in August, 52.6 in July, 54.3 in June, 53.4 in May, 58.9 in April, 62.6 in March, 60.5 in February, 54.1 in January , 53.6 in December, 58.5 in November, 59.1 in October, 55.4 in September, 55.0 in August, 59.6 in July, 62.4 in June 2021 after falling to levels of 29.0 in May, 13.4 in April, 34.5 in March 2020.
22:45 NZD Retail sales (1st quarter)
The retail sales report is published by the New Zealand Bureau of Statistics. The change in retail sales is usually considered an indicator of consumer spending. In general, a high value of the indicator is a positive factor for NZD, and a low value is a negative factor. In the 3rd quarter of 2021, retail sales decreased by -8.1% due to quarantine restrictions due to Covid-19, and increased by 8.6% in the 4th quarter. In Q4 of 2022, retail sales decreased by -0.6%. This is a negative factor for the NZD. However, the NZD may strengthen if the data is better than the previous values. Weak report will negatively affect the NZD. Forecast for Q1 2023: -0.4%.
Wednesday, May 24
02:00 NZD Decision of the RB of New Zealand on the interest rate. Accompanying statement. RBNZ’s monetary policy statement
Subdued economic growth (New Zealand GDP growth has slowed since the second half of 2018) and a weakening labor market, as well as an escalation of international trade wars and a worsening global economic outlook have forced the Reserve Bank of New Zealand to keep interest rates low for a long time. An additional and unforeseen risk to the global and New Zealand economies was the coronavirus epidemic.
However, following the results of the meetings held in October and November, the Reserve Bank of New Zealand (for the first time in 7 years) raised the key interest rate to 0.50%, and then to 0.75%. In February and April 2022, the interest rate was raised again to 1.5% to dampen inflation and contain rapidly rising home prices. The current RBNZ interest rate is 4.75%.
Earlier, the RBNZ said that the economy no longer needs the current level of monetary stimulus.
The RBNZ is expected to raise the interest rate again at this meeting, and may also speak in favor of a further increase in the interest rate at the next meetings. Market participants following the NZD quotes need to be prepared for a sharp increase in volatility during this period of time.
In the accompanying statement and comments, the RBNZ management will provide an explanation of the interest rate decision and comments on the economic conditions that contributed to the decision.
At this time, the volatility in the quotes of the New Zealand dollar may rise sharply.
Earlier, the RBNZ said that against the backdrop of “multiple uncertainties”, monetary policy “will remain loose for the foreseeable future” but “may be adjusted accordingly.”
03:00 NZD Press conference of the RBNZ
The head of the RBNZ Adrian Orr will comment on the rate decision. Usually, during the press conference, volatility in the NZD quotes increases. Orr’s speeches often serve as an informal source of information on the future direction of the RBNZ’s monetary policy. In his opinion, the country’s monetary policy should correlate with the dynamics of employment and the financial stability of the state, and inflation.
06:00 GBP Consumer Price Index. Core Consumer Price Index
Consumer Price Index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the British consumer basket. The CPI index is a key indicator of inflation. Its publication causes active movement of the pound on the foreign exchange market, as well as of the FTSE100 index of the London Stock Exchange.
In the previous reporting month (in March), the growth in consumer inflation amounted to +10.1% (in annual terms). The data suggests that inflationary pressures are still high, which is likely to support the pound. A value of the indicator below the forecast/previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to maintain an easy monetary policy.
Forecast for April: +1.7% (+8.2% in annual terms).
Core Consumer Price Index (Core CPI) is published by the Office for National Statistics and determines the change in prices of a selected basket of goods and services (excluding food and energy) over a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the GBP, a negative result weakens it.
In March, Core CPI (in annual terms) increased by +6.2%. It is likely that the publication of the indicator will have a positive impact on the pound in the short term if its value is higher than the forecast and previous values. An indicator value below the forecast and/or previous values may provoke a weakening of the pound.
Forecast for April: +6.1% (in annual terms).
18:00 USD Minutes of the last meeting of the Federal Open Market Committee
The publication of the minutes is extremely important for determining the course of the current policy of the Fed and the prospects for raising interest rates in the US. The volatility of trading in financial markets during the publication of the minutes usually increases, since the text often contains either changes or clarifying details regarding the results of the last FOMC meeting of the Fed.
Following the meeting on May 03, 2023, the leaders of the central bank raised the interest rate by 0.25% and announced the need for further tightening of monetary policy.
Economists and market participants are now evaluating how the Fed will deal with inflation, which hit 40-year highs in June 2022 but then began to decline. Many of them believe that by the end of the year the Fed will move to cut interest rates.
A soft tone of the minutes will have a positive impact on stock indices and negatively on the US dollar. Tough rhetoric of the Fed leaders regarding the prospects for monetary policy will push the dollar to further growth.
Thursday, May 25
12:30 USD US annual GDP for the 1st quarter (second estimate)
GDP is one of the key indicators (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens US dollar; a weak report on GDP has a negative impact on the US dollar. In the previous 4th quarter, GDP grew by +2.6%, after growing by +3.2% in the 3rd quarter, falling by -0.6% in the 2nd quarter, -1.6% in the 1st Q4, +6.9% growth in Q4 2021, +2.3% in Q3, GDP grew +6.7% in Q2, +6% in Q1 2021 .3%. If the data points to a decline in GDP in the 1st quarter of 2023, the dollar will come under strong pressure. Positive data on GDP will support the dollar and US stock indices.
Forecast (second estimate): +1.1% (preliminary forecast was +2.7%, and the estimate was 1.1%).
Friday, May 26
01:30 AUDRetail Sales Index
Retail Sales Level Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the AUD; a decrease in the indicator will negatively affect the AUD. Previous index value (for March) +0.4% (after +0.2%, +1.9%, -3.9%, +1.7%, +0.4%, +0.6%, +0.6%, +1.3%, +0.2% in previous months). If the data turns out to be weaker than the previous value, the AUD may drop sharply in the short term. If it’s above the previous values, the AUD is likely to strengthen.
Forecast for April: -0.4%.
12:30 USD Durable goods orders. Capital goods orders (ex defense and aviation)
This indicator reflects the value of orders received by producers of durable goods and capital goods (capital goods are durable commodities used to produce durable goods and services) involving large investments. Goods produced in the defense and aviation sectors of the US economy are not included in this indicator. A high result strengthens the USD.
Durable goods orders previous values: +3.2% in March, -1.0% in February, -4.5% in January 2023, +5.6% in December, -1.7% in November 2022, +0.7% , +0.3%, +0.2%, -0.1%, +2.2% in June, +0.8% in May, +0.4% in April, +0.6% in March , -1.7% in February, +1.6% in January.
Capital goods orders ex defense and aviation previous values: -0.6% in March, -0.1%, +0.8% in January 2023, -0.1% in December, 0% in November 2022, + 0.3% in October, -0.8% in September, +0.8% in August, +0.3% in July, +0.9% in June, +0.6% in May, +0, 3% in April, +1.1% in March, -0.3% in February, +1.3% in January.
In theory, the relative growth of the indicator has a positive impact on the dollar, and the decline of the indicator is negative. The market reaction to its negative value may also be negative for the dollar in the short term. Data worse than the previous value and/or the forecast will also have a negative impact on dollar quotes.
Better-than-expected data will have a positive impact on the dollar.
Forecast for February: -0,9% and 0%, respectively.
Price chart of EURUSD in real time mode
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