- Monday is going to bring preliminary PMIs coming from European economies
- ECB and CBT decisions in the spotlight this week, the latter could draw even more attention
- Pound failed to gain last week, it will be offered the first GDP reading for Q1 on Friday
The first part of April was completely dominated by politics. It may very well stay this way this week as sanctions and Trade Wars remain unfinished stories. However, we also have important central bank meetings and GDP reports that will fight for attention. The Monday’s timetable looks as follows:
European PMIs – France/Germany/EMU (8:00/8:30/9:00 pm BST): The European economy had a really successful last quarter of 2017, but since then a lot has changed. We were already offered a few somewhat disappointing PMIs since the beginning of the year, and it’s possible that this trend will be continued. On the other hand expectations are much more muted this time round as each index is forecast to decline in April compare to its value from the prior month.
US data – PMI/existing home sales (2:45/3:00 pm BST): The US dollar managed to gain traction last week, and it was enough to spur some market analysts to start deliberating whether it was a short-lived pullback or a longer comeback. The first day this week is bringing some economic data which could help dispel those concerns. PMI for manufacturing is expected to come in at 55.2 while for services at 54.1. On top of that, existing home sales should show 5.55 million, a tiny increase from 5.54 million in February.
What to watch for a remainder of the week?
ECB meeting: decision (Wednesday, 12:45pm GMT) post-meeting conference (1:30pm)
It’s not going to be an easy conference for the ECB president Mario Draghi. The euro held nicely over the past few weeks as some board members aired outlook for a definite end of QE this December and deposit rate hike as a next step next year. However, on the macro front there are few reasons that could justify the bullishness. The PMI indicators continued to slide (albeit from a high levels) while inflation disappointed (again) in March. Are the euro bulls set for a disappointment? Affected markets: EURUSD, DE30.
CBT meeting (Wednesday, 12:00pm GMT)
There’s no other currency being under a spotlight similar to the Turkish lira this week. Just days ago Turkey seemed to be on the verge of currency crisis as investors fled on economic overheating concerns. This bloodshed has been stopped by a bold move from president Erdogan to call snap elections but the real test for the currency comes this week. Markets are convinced that the CBT must raise rates and not just by mere 25-50 bps. Actually, a hike of 75-100 bps is expected. If the CBT shies away from the move the consequences for the lira could be dire. Affected markets: USDTRY, EURTRY.
GDP reports in UK (Friday, 9:30am GMT) and US (Friday, 1:30pm GMT)
We pointed out last week that the bar was hanging high for the pound ahead of some key monthly releases and indeed the GBP bulls were disappointed by weaker wage and inflation reading. The bar ahead of the GDP report is set at a lower level as even the Bank of England admitted that Q1 could have been affected by weather. In the US, the Q1 has been traditionally weak and retail sales data suggests that this time it might be no different. Affected markets: GBPUSD, US500.
The GBP suffered last week partly on the back of dovish Carney. Having said that, it looks well positioned to bounce back as it’s already reached a strong support in form of a trend line. Source: xStation5