Weekly Forex Outlook – Week of 25th May 2020

Market OutlookNow it’s looking to be a fairly quiet week however there are a few things coming up that markets will be looking at. Let’s start with a developing us-china feud and it appears though that the Australian dollar has brushed off these renewed tensions. Australia will be reporting quarterly figures on construction, that’s on Wednesday and capital expenditure on Thursday.

We’ve seen some rising,tensions between the US and China and,that has impacted risk sentiment slightly in recent date who’s had a slight risk off tone though given the gains we’ve had in recent weeks it’s only very small losses we’ve seen any equities markets in particular and as you said, the Australian dollar in fact continued to make fresh highs next week there could be some risks from quarterly data on construction and capital expenditure which will give us indication as to what expect in the GDP numbers coming up in the following week. Overall investors are fairly optimistic about the outlook for the Australian economy at least a relative to other advanced economies because Australia hasn’t been impacted as much by the virus and its economy have started to reopen and given that it trades heavily with China and China has also started to reopen too. So things are not looking as gloomy with Australia as with some other economies so overall, even if you might see some knee-jerk reaction in the Australian dollar we’ll probably continue to see the Aussie maintaining its uptrend now.

It appears that the worst has passed for now at least; regarding oil after the severe slump and that demand and prices oil seems to be on the rebound. But contrary to what one would expect the Canadian dollar has been unable to gain now with Canadian quarterly GDP numbers coming up will loonie will come under further pressure this week? Well that’s right so,the loonies rebound from its lows have been not particularly inspiring,especially when compared to the Australian dollars impressed rally and even though we are now seeing that oil glut easing somewhat over the past week or so,the loonie hasn’t has been unable to break about the key resistance barrier,against the US dollar and could potentially come under pressure next week from the GDP numbers so the loonie,will be vulnerable to a big miss in the GDP for the first quarter and that’s because although we are seeing oil prices recover the outlook overall for the energy sector which is the main driver for the Canadian economy, is not looking too great at the moment, turning to the Eurozone, the euro had a rather good week one would say with the,announcement of a 500 billion euro recovery fund and upbeat PMI we’re expecting a lot of data out of the eurozone this coming week.

We did just have the flash PMI numbers for May for the euro area,and they were slightly better than expected we are seeing a bit of a recovery in early May and the the main data next week which will be the German Ifo business survey and economic sentiment indicator. For the Eurozone now,those will probably stay within trend as,we saw in the flash PMI and point to abit of a recovery in the early parts of May and I should further help the Euro,overall though in order for the Euro to,make much more substantial gains,we will need to see further evidence of,economic recovery in the Eurozone.

Finally let’s look at u.s. consumption which is a significant part of the US economy,investors are bracing themselves for weak numbers. Question is how weak they are going to be and what will tell us about the economic contraction we’re likely to see. So the main data from the US will be the personal consumption personal income we already saw for the previous month’s. The big falls in these figures and for April we are likely to see another big fall,especially personal consumption that’s expected to have plunged by record 9.7%,month or month in April we’re also going to have the second estimate of GDP for the first quarter as well as durable Goods,although goods orders expected to decline again in double-digit numbers,but despite all the gloomy numbers we’re expecting, the dollar could possibly gain on the back of it because if that risk tone deepens in the coming week and the US data provides a bit of a reality check for the markets, though the dollar could actually benefit on the back of that because of course it has been acting as a safe haven throughout this virus crisis on the other hand better than expected numbers might actually help the dollar pull back a little bit.

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