It will be a busy week for US data and the dollar in the next seven days as a number of key indicators are expected, including the all-important NFP report at the end of the week. The euro will also come into focus as the European Central Bank holds its scheduled policy meeting, while Chinese PMI and Australian and Canadian GDP numbers will also be important.
Japanese household spending likely to fall back in April
Japanese data will start the week on Monday with the release of retail sales figures. Retail sales in April are forecast to decline by 1.2% year-on-year, and there is likely to be further evidence of weak consumer spending from household spending data out on Tuesday. Household spending is forecast to fall back in April, by 0.6% month-on-month, after a better-than-expected 0.5% gain the prior month.
The Bank of Japan’s governor, Haruhiko Kuroda recently admitted that consumption is not strong enough. The failure for consumption to make a sustained recovery may yet convince the BoJ that further easing is needed.
Also due on Tuesday are unemployment and industrial production figures. Industrial output is forecast to contract by 1.5% in April, offsetting some of the 3.8% gain of the previous month.
No major rebound in NFP expected in the US
One country where consumption has been faring better is the United States, and the latest personal consumption data is expected show a strong rebound in April after a somewhat muted start to the year. Personal consumption expenditure out on Tuesday is forecast to grow by 0.6% m/m in April, a major improvement on March’s 0.1% rate.
Personal income growth meanwhile is expected to hold steady at 0.4%. Also expected to hold steady is the core PCE price index, which is forecast to stay unchanged at 1.6% y/y in April. The Fed’s preferred gauge of inflation jumped to 1.7% in January but has since levelled off. A surprise strong reading would likely fuel expectations for a June/July rate hike.
Rounding off Tuesday for the US will be the Conference Board consumer confidence index and the Chicago PMI.
On Wednesday, the closely-watched ISM manufacturing PMI is due and is estimated to show a slowing of manufacturing activity from 50.8 in April to 50.2 in May. The non-manufacturing composite out on Friday is also forecast to decline slightly, from 55.7 in April to 55.3 in May.
On Thursday, the ADP report is expected to show an increase in the employment change to 178k in May. This is a slightly stronger figure than the NFP forecast, which is expected to rise more moderately from 160k in April to 164k in May. The rest of the NFP report out on Friday is not expected to bring any surprises, with the unemployment rate forecast to stay unchanged at 5% and average hourly earnings easing slightly to 0.2% m/m.
With the May NFP report being the last one before the June 14-15 FOMC meeting, the dollar is likely to be sensitive to any deviations from the forecasted figures. Also to watch for possible dollar moves are more Fed speakers next week, including James Bullard on Monday and Wednesday, Jerome Powell and Robert Kaplan on Thursday, and Charles Evans and Lael Brainard on Friday.
ECB to probably keep policy unchanged
The Eurozone will have its fair share of data next week, with the economic sentiment indicator starting the week on Monday. The index is forecast to edge up slightly to 104.4 in May. Flash inflation figures will be more closely watched though on Tuesday as the ECB struggles to lift prices into positive territory. The preliminary CPI estimate for the Eurozone is forecast to improve only marginally in May to -0.1% y/y from -0.2% in April. Also due the same day are euro area unemployment figures, while retail sales will follow on Friday.
The big event of the week for the euro though will come from the ECB’s policy meeting in Vienna on Thursday. No new measures are expected to be announced at the June meeting while the Bank assesses the impact of its recently announced measures, though ECB President Mario Draghi will likely demonstrate an easing bias at the press conference.
Also due for the Eurozone next week are the final Markit PMI readings for May.
China and UK await PMI readings
China and the UK do not get flash PMI readings, so next week’s PMI’s will be closely watched. The Caixin/Markit manufacturing PMI out of China on Wednesday is expected to show ongoing contraction in manufacturing activity, with the index falling slightly from 49.4 to 49.3 in May. The official government PMI is also forecast to worsen slightly with manufacturing activity being flat at 50.0 in May.
In the UK, the Markit/CIPS manufacturing PMI is also due on Wednesday and is expected to show manufacturing activity declining for the second straight month, though at a slower pace. The index is forecast to rise from 49.2 to 49.6. The construction and services PMIs will follow on Thursday and Friday respectively. Construction activity will likely be slightly weaker but services activity should improve in May.
Australia and Canada to see first quarter GDP estimates
The Australian dollar has come under renewed pressure recently as the Reserve Bank of Australia grows more concerned about inflation not returning to the target band quick enough. However, growth in the economy remains fairly strong and first quarter growth is not likely to be any different.
GDP growth in the first quarter (out on Wednesday) is forecast to have risen by 0.6% quarter-on-quarter, same as from the previous quarter. Also to watch for Australia next week are retail sales and trade balance figures for April.
Canada will see similar data with its set of GDP and trade data. Canada’s economy has not been as robust as Australia’s as its oil exports have been hit hard by the plunge in oil prices. First quarter GDP in Canada is forecast to expand at an annualized rate of 2.9% when released on Tuesday - a significant rebound from the previous quarter’s 0.8% rate.
If confirmed, the data will likely help the Canadian dollar’s recovery against the resurgent US dollar.