Weekly Forex Report - 15 April 2019
Over the course of last week, the FX market was interested in announcing the date for postponing Britain's exit from the European Union (EU). It was agreed between the Brrxit parties to postpone the date of exit until the end of October. This is in addition to the announcement of the monetary policy of both the European Central Bank and the minutes of the last meeting of the US Federal Reserve, and the policy of central banks was described with caution and anticipation with the continuing risks to the global economic growth.
Despite the postponement of the BREXIT we did not notice any positive moves from the GBP/USD pair. The euro is still suffering from a slowdown in the Euro-Zone economy led by Germany. Japanese Yen and Swiss Franc Safe haven currencies lost much of their gains as investors grew more willing to take risks. Gold prices have suffered losses as investors are optimistic that the US-China deal was close to end the world's biggest trade war that threatens the global economy as a whole.
In the US, the minutes of the FOMC meeting confirmed the need to be patient about the future US interest rate hike, and opened the way for a rate cut if global risks continue to put pressure on the US economy. At the same time, the European Central Bank decided to leave the interest rate unchanged as expected. Bank Governor Mario Draghi stressed that the downside risks were in place and that the bank was ready to use all tools to support the region's slowing economy.
In the following lines we will review the most important factors that will affect the movements and performance of the Forex market for the week:
Monday: Bank of Canada Business Outlook Survey: The quarterly report, which is highly respected by the Canadian Central Bank, is released and allows traders to get an idea of the direction of interest rate decisions. It is also respected because of its predictive qualities in relation to future economic conditions. This is because companies that are surveyed are selected based on the composition of the country's GDP. Investors are interested in it because it provides an indication of the Canadian economic situation.
Tuesday: The Bank of Australia's monetary policy meeting minutes: The Reserve Bank of Australia releases the minutes of the monetary policy meeting two weeks after the announcement of the monetary interest rate. It provides a detailed account of the latest RBA Board meeting and an in-depth view of the economic conditions that influenced the decision regarding interest rate setting.
British Average Wage Index: The average wage for workers in the UK, including bonuses, rose by 3.4 percent year-on-year during the three-month period to January after adjusting the reading in the previous period to 3.5 percent. This month's reading exceeded analysts' expectations of a 3.2 percent increase. Wages grew faster in the areas of finance, business services, manufacturing and construction, while remained stable in the public sector. At the same time, wages have increased at lower rates in services, wholesale trade, retail trade, hotels, restaurants and the private sector.
Excluding allowances, wages rose by 3.4 per cent, the same as in the previous period. The reading is in line with analyst expectations. In real terms, wages, including bonuses, rose by 1.5 per cent, while wages, excluding allowances, rose by 1.4 per cent. The forecast for the three months to February 2019: an average of 3.5 percent.
British CPI: In the UK, annual inflation rose to 1.9 percent in February from 1.8 percent in the previous month. The February reading was higher than analysts' forecasts of 1.8 percent. Inflation has risen mainly due to higher prices for food, cultural, entertainment, alcohol and tobacco items. The forecast for March 2019: 2.0 percent.
Comments from Governor of the Bank of England Mark Carney: Mark Carney, governor of the Bank of England, is due to speak in Paris at the Financial System Development Network Conference. The pound is often very volatile during Carney’s comments as traders try to understand the direction of interest rates.
German Industrial PMI: In Germany, the IHS Markit / BME Manufacturing PMI was revised to 44.1 in March from a preliminary reading of 44.7 and 47.6 in February. it pointed to a sharp contraction in manufacturing activity since July 2012, amid a decline in new orders, which was partially driven by an additional decline in exports. According to the final estimates the new and foreign trade orders fell mainly due to uncertainty about EU tension and trade tariffs, the weakening of the automotive sector and the decline in global demand. Production also fell, as intermediate goods manufacturers recorded the biggest decline alongside capital goods producers. Employment fell for the first time in three years and inflationary pressures declined. Above all, business confidence has fallen to a more pessimistic level for more than six years.
Purchasing Managers Index for German Services: In Germany, the IHS Markit PMI reading was revised to 55.4 from the initial reading of 54.9. In February, reading has reached 55.3, the strongest level of the sector in six months. The services PMI rose amid rising demand and growth in customer numbers. The new job has risen more than ever since September despite renewed contraction in new business coming from abroad. Job creation was at the highest level since October. Input cost inflation was at its lowest level in 11 months. Production prices rose at a record rate. Above all, corporate confidence fell slightly, but it was second in the past six months.
UK Retail Sales: In the UK, retail sales rose 0.4 percent month-on-month in February after a revised reading of the previous month down to an increase of 0.9 percent. The February reading exceeded analysts' expectations of a 0.4 percent drop. Growth was seen in all major sectors, with the exception of food stores, which recorded the biggest decline since December 2016. Fuel sales jumped 2.2 per cent and non-food trade rose 0.9 per cent, driven by higher sales in household goods and non-specialized shops.