Forex and Market Outlook for May 3rd to 8th 2021
This week could well be very eventful from data, Central Bank meetings, and political risk.
However, we should first look back at events last Friday when finally, the market responded to data, that throughout April had been overwhelmingly USD positive, but ignored as US Bond Yields fell. however, yields found some support and finished the month off their lows, taking the USD with it.
The Federal Reserve meeting finished on Wednesday with Jerome Powell’s press conference, where he went out of his way to dampen all expectations that the Fed would taper bond purchases anytime soon, and inflationary pressures would be transitory.
USD bears will be saying the USD strength was just from month end demand and profit-taking. Whether this is the case or not, we could get some answers this week.
Today will see many countries observing the Labor day holidays, so liquidity will be lower than usual.
The data week highlights start tonight with US ISM for Manufacturing which is likely to be strong coming in at 65 and will culminate with Fridays Non-Farm Payroll which is expected to come in at 980,000 jobs added in April. Those numbers will be hard to ignore.
However, the current forex market narrative is that strong US economic activity is a positive for US import growth and good for the exporter currencies, causing the US trade deficit to widen. The growing US budget deficit is also a USD negative.
Central Bank meetings this week feature the Reserve Bank of Australia where not much is expected to happen on Tuesday.
On Thursday, the Bank of England meets, where there is a growing suspicion that tapering of bond purchases may be signaled soon. That would help the GBP considerably if correct.
Also on Thursday are UK local elections.
The most important will be for the Scottish Parliament. The Scottish National Party are expected to win a landslide, not so much because the Scots people want independence, it’s just that the unionist vote is split between the 3 more traditional UK parties. However, if the SNP get a Parliamentary majority, they are expected to claim a mandate from the Scottish people to call a new referendum on independence from the UK.
The full result will not be out until Saturday due to Covid 19 protocols. It is also not clear if there will be exit polls released on Thursday night. If the SNP get a big win, it could be a bad day for the GBP on Friday or Monday morning.
Analysis By trader 8dc www.eightdragonscapital.com