SMATS FX Weekly Market Report | Monday 18 May 2020

USD

Horrific updates out of the US did not impact the Greenback as it rallied against most major currencies. It is likely that the negative global sentiment helped the USD as traders flocked towards the safe haven. In a week that is short of US data, the most important release out of the US this week is likely to be the Federal Reserve’s meeting minutes which are due out on Wednesday, any negative tones from the Fed is likely to cause the US Dollar to weaken. PMI numbers are also due out on Thursday, we expect that the services figure will rise from 26.7 to 32.0 while the manufacturing index has been slated to increase from 36.1 to 39.0.

Influences on HKD, SGD & AED

The Hong Kong Dollar will be impacted by the release of its unemployment rate for April on Tuesday, expectations are that it will tick up from 4.2% to 4.3%. On Thursday, the year-on-year inflation rate has been forecast to fall from 2.3% to 1.3% in April, compared to this time last year. The UAE released their inflation report on Monday, it missed the expectation of -2.8% and came in at -1.9%, strengthening the Dirham. Not much out in terms of data for Singapore this week so it will be rely on counter-currency action and it will be boosted by a resurgence in emerging market currencies.

AUD

The Aussie Dollar was dragged down last week thanks to geopolitical and health issues pulling investors away from riskier assets. We do not have much in terms of top-tier data, but that does not mean we will not see movements in the rate. The RBA will be releasing their meeting minutes after maintain interest rates at 0.25% in May. Members of the Reserve Bank expect to see GDP at 6% in 2020 and the unemployment rate remaining at 7.5% through to 2021. As a high-yielding currency, the AUD will benefit from a risk-friendly trading environment.

NZD

The Reserve Bank of New Zealand came out with a very dovish statement last week which lead to a sea of red for the Kiwi Dollar. As US-China trade tensions rise and another wave of COVID-19 fears threaten Kiwi strength. Lower global demand is likely to drag down New Zealand PPI numbers which are due out during Monday. Retail sales are due out on Thursday, analysts expect a decline of 1.5% in the first quarter of 2020.

EUR

The Euro dominated the major currencies last week as risk aversion seemed to be the main driver of price action across the board. This week the European Central Bank will be giving their monetary policy meeting which will release detailed records of the central bank’s latest meeting. On Friday, the larger economies in Europe will be releasing their PMI numbers, German manufacturing is set to climb from 34.5 to 39.0 while the services figure has been forecast to rise from 16.2 to 26.2. The French services PMI has been slated to improve from 10.2 to 28.8 and the manufacturing figure is likely to edge higher from 31.5 to 35.6.

GBP

The Pound Sterling took another beating last week as Brexit fears rise, horrific economic data out of the UK and COVID-19 updates out of the UK are not helping. The Bank of England raised the probability of more stimulus measures being added to the UK economy but there is plenty of data out of the UK that can hopefully spark a turnaround for the GBP. Employment figures are out on Tuesday, the unemployment rate is expected to rise from 4.0% to 4.4% in March while the Claimant Count for April is likely to increase by 150 000 from the 12 200 increase in March. On Wednesday, the head of the BOE, Bailey is set to testify on the economic impact of the virus. Then on Thursday, PPI readings are due, the flash services figure has been slated to improve from 13.4 to 20.0 for May while the manufacturing figure has been dubbed to rise from 32.6 to 35.1. Remember, any reading above 50.0 indicates expansion while readings below 50.0 are a sign of contraction.