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Economic calendar for the week 04.05.2020 - 10.05.2020

May 3, 2020

May 3, 2020

Economic calendar for the week 04.05.2020 – 10.05.2020Jana Kane

**Overview of the main events of the Forex economic calendar for the

next trading week 04.05.2020 to 10.05.2020**

Trading on key Forex news: we are expecting the publication of important macro statistics from the US, New Zealand, Germany, Canada, as well as the results of the meeting of the central banks of the UK and Australia, at which the interest rates will be decided.

The two largest world central banks, the Fed and the ECB, have decided so far not to change their monetary policies. The Fed officials decided that they already did a lot to support American companies and businesses in the context of the coronavirus. At the same time, they assured that the central bank “intends to use the full range of tools to support the US economy in this difficult time”, and the Fed is already preparing a second series of assistance programs that provide direct lending to companies, state governments, and local authorities. “The sooner we take the virus under control, the sooner trust will return to people and they will resume their economic activity,” said the Fed Chairman Jerome Powell at the subsequent press conference.

Last Thursday, the ECB refrained from making changes to its monetary policy, focusing on the banking system and adopting two changes to stimulate lending to companies and households.

The ECB has lowered the interest rate on the already existing program of preferential lending for banks known as the targeted longer-term refinancing operations (TLTRO). Beginning in June, banks lending to customers will be able to take loans from the ECB at a rate of -1%, i.e. the ECB will pay banks at 1% to take loans from it. Lenders who do not meet the criteria of the program will be able to take loans at a rate of -0.5%. The ECB has also introduced a new longer-term refinancing emergency program (PELTRO) designed to ease tensions in the short-term lending markets.

However, the ECB’s decisions did not help European stocks, which fell sharply at the end of last week, while the euro strengthened. Shares of European banks were among the most affected assets: Euro Stoxx Banks Index fell on Thursday by 5.3%.

The Bank of Japan also did not begin to make changes to its policy last week. However, the reaction of Asian and global financial markets to this decision was almost invisible.

At the same time, the global economy and businesses continue to suffer enormous costs due to limitations associated with coronavirus.

Thus, the ISM Purchasing Managers Index (PMI) for the US manufacturing sector in April fell to 41.5, the lowest level since April 2009, against 49.1 in March. This was announced on Friday by the Institute for Supply Management (ISM).

The PMI for the US manufacturing sector, calculated by IHS Markit, also showed a record drop in April, as manufacturers paused and canceled orders amid the spread of coronavirus. The manufacturing PMI fell to 36.1 in April from 48.5 in March, reaching an 11-year low.

Some governments have already expressed their intention to partially lift restrictions on movement. Meanwhile, medical experts are warning about the possibility of a second wave of the epidemic if the restrictions are lifted prematurely.

Next week, investors will be focused on the central banks of Australia and the United Kingdom and their decisions on interest rates, as well as a monthly report from the US labor market.

It is also worth noting that next Friday, May 8, Europe will celebrate Victory Day in the 2nd World War. European banks will be closed. Trading volumes will be low on this day.

_ Traders should pay attention to the following significant macroeconomic data expected next week:_

* during the coming week new events may be added to the calendar and scheduled events may be canceled

****** GMT time

Monday, May 4

No important macro statistics planned to be released.

Tuesday, May 5

04:30 AUD Interest rate decision. RBA’s accompanying statement

In March, the RBA made 2 rate cuts, bringing it to its current level of 0.25%, and launched a quantitative easing program. At the same time, 3-year Australian government bonds have a target yield of 0.25%. The RBA will begin a program of lending to the banking system in the amount of at least 90 billion Australian dollars and will buy bonds worth 5 billion Australian dollars.

Negative forecasts of economists suggest that the Australian economy will decline by 6% in 2020, which will be the sharpest annual decline in GDP since the great depression of the 1920s. The unemployment rate is likely to rise to about 8.5%.

Some economists have started talking about Australia entering its first recession in almost 30 years, which could turn into depression.

“We live in extraordinary and difficult times,” said the head of the central bank Philip Lowe. In his opinion, “further stimulation is needed.” He said this at a press conference on March 19, where the RBA lowered the interest rate during its unscheduled meeting.

Philip Lowe has repeatedly stated that the central bank is ready to lower the rate again if necessary, although the likelihood of introducing negative rates, in his opinion, is “extremely small.”

The main negative factors for the Australian economy are weak wages growth, a weak labor market and a slowdown in growth. For almost four years ago the annual inflation has remained below the target range of 2-3% set by the RBA.

Unemployment in the country remains above 5% for many years, reluctant to decline. Now the coronavirus pandemic has been added to the above- mentioned negative factors, which has already hurt Australia’s economy and transport in the tourism industry. The RBA also expresses concern that unemployment could rise to the level of 8%, or even 10%.

In this regard, we cannot eliminate the fact that on Tuesday May 5, the RBA may again cut the rate, although most economists believe that the bank will leave the key rate unchanged at this level at 0.25%, while expressing concern over global economic outlook with the ongoing epidemic of coronavirus.

In the accompanying statement, the RBA leaders will explain the reasons for the decision on the rate. If the RBA signals a possibility of further easing of monetary policy, then a further fall in the Australian dollar will become inevitable.

**14:00 USD Employment Index (from ISM) in the services sector. PMI

(from ISM) in the US economy services sector** ****

This is an important indicator of economic conditions in the United States published by the Institute of Supply Management (ISM) and reflects business conditions in the US services sector, taking into account the expectations of new orders, stocks, employment and supplies. The ISM employment index in the services sector is considered an important leading indicator when the US Department of Labor compiles an employment report. A high value strengthens the USD, while a low value weakens it. In April, this indicator came out with a value of 47.0. A relative decline in the index may negatively affect the dollar in the short term. A result below 50 is also seen as a negative factor for the USD.

PMI index of business activity in the services sector assesses the state of the services sector in the US economy. The services sector data (unlike the manufacturing sector) have practically no effect on the country’s GDP. The growth of the indicator and the result above 50 are considered as a positive factor for the USD. At the same time, a relative decrease in the indicator or data worse than the forecast may have a short-term negative impact on the dollar.

Forecast for May: 32.0 (versus 52.5 in March, 57.3 in February). A relative decline in the index may negatively affect the dollar in the short term. At the same time, results below 50 are considered as a negative factor for the USD.

**22:45 NZD Employment rate. Unemployment rate (data for the 1st

quarter)**

Employment rates reflect a quarterly change in the number of employed New Zealand citizens. The growth of the indicator has a positive effect on consumer spending, which stimulates economic growth. A high value is a positive factor for the NZD, and a low value is negative. Forecast: in the 1st quarter, the number of employed New Zealand citizens decreased, and the employment rate decreased by 0.1% (against the zero value in the 4th quarter).

Also at the same time, the Bureau of Statistics of New Zealand publishes a report on the unemployment rate - an indicator that estimates the ratio of the share of the unemployed to the total number of able-bodied citizens. The growth rate indicates a weak labor market, which leads to a weakening of the national economy. The decline is a positive factor for the NZD. Forecast: unemployment in New Zealand in the 1st quarter increased to 4.2% from 4.0% in the 4th quarter of 2019.

Other indicators from the New Zealand Bureau of Statistics report are also expected to come out with a slight deterioration, which is likely to negatively impact the NZD. Data worse than expected will also have a negative impact on the NZD.

Wednesday, May 6

12:15 USD ADP National Employment Report

Change in the US employment (ADP National Employment Report) in April. Usually, the publication of this indicator has a strong impact on the market and dollar quotes. Although there is usually no direct correlation with Non-Farm Payrolls, the ADP report is considered a harbinger of the official report of the US Department of Labor on the general state of the labor market in the country. The growth of the indicator has a positive effect on the dollar. A decrease of 13.05 million the number of workers in the US private sector is expected (after a decrease of -27,000 in March). A decrease in the result will have a negative effect on the dollar.

23:50 JPY Bank of Japan’s Monetary Policy Committee Meeting

As a result of the regular meeting held last week, the Bank of Japan decided to keep the target level of 10-year bond yields of Japan at about zero, and the short-term deposit rate at -0.1%. The bank promised to maintain the current extra-soft monetary policy. At the press conference after the meeting of the Bank of Japan, its manager Haruhiko Kuroda repeated his famous phrase that the central bank was ready to ease monetary policy if necessary.

The committee will also analyze the economic situation in Japan and provide guidance on possible future prospects for the Bank of Japan’s financial policy. If the tone of the protocol indicates the firm intentions of the Bank of Japan regarding monetary policy in the country, this will negatively affect the Japanese stock market and strengthen the yen. Conversely, soft rhetoric regarding the prospects of the bank’s monetary policy will contribute to the weakening of the yen and the growth of the Japanese stock market.

Thursday, May 7

**06:00 GBP Bank of England’s interest rate decision. Minutes of

the meeting of the Bank of England. Planned volume of asset purchases by the Bank of England. Monetary Policy Report**

In March (March 11 and March 19), during its extraordinary meetings, the Bank of England cut its interest rate twice, bringing it to 0.1%, and announced its intention to acquire British government bonds in the amount of 200 billion British pounds, trying to counter economic damage from a coronavirus pandemic. The central bank’s management announced the expansion of its bond portfolio to 645 billion pounds from the current volume of 445 billion pounds. “The current situation is completely unprecedented,” said Andrew Bailey, new Governor of the Bank of England, at a press conference after the emergency meeting on March 19. Bailey said he expects a sharp contraction in the economy due to the coronavirus, and the Bank of England is ready to take further stimulus measures if necessary. “No, we are not finished,” he said. Based on these statements by Andrew Bailey, it is fair to expect further action from the Bank of England towards easing its monetary policy. It is possible that at this meeting on May 7, the Bank of England will again take them.

Also at this time the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the votes cast for and against the increase / decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as with a large current account deficit in the UK balance of payments.

The Bank of England Asset Purchase Program, also called Quantitative Easing, has remained unchanged since August 2016 at £435 billion per month. In March, the Bank of England’s bond purchase volume on the open market was increased to a new level of 645 billion pounds.

Intrigue over further actions by the Bank of England continues. Both in the pound and the FTSE100 index trade, a lot of trading opportunities will be available during the publication of the bank’s decision on rates.

Also at the same time, the Bank of England’s monetary policy report will be published containing an assessment of economic prospects. At this time, the volatility in the pound quotes can increase sharply. One of the main guidelines for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the level of inflation. If the tone of the report is soft, then the British stock market will receive support, and the pound will decline. Conversely, the tough rhetoric of the report in relation to containing inflation, implying an increase in the interest rate in the UK, will lead to the strengthening of the pound.

06:30 GBP Speech by Bank of England head Andrew Bailey

Participants in financial markets are expecting him to clarify the situation regarding the further policy of the central bank of Great Britain. The volatility during Andrew Bailey’s speech could rise sharply in the quotes of the pound and the index of the London Stock Exchange FTSE, if he gives any hints of tightening or easing monetary policy.

12:30 USD Initial jobless claims in the US over the past week

The situation on the country’s labor market continues to deteriorate rapidly. Back in February, the indicator of initial claims for unemployment benefits was within its average values ​​of 193-252 thousand. However, then the situation began to deteriorate sharply. Over the week of March 22-28, 6.9 million claims were submitted, then 6.606 million claims, shocking observers and market participants. A similar indicator published last Thursday (for the week of April 19-25) came out with a value of 3.839 million applications.

According to economists, in the past seven weeks, the US economy has lost more than 30 million jobs, which implies an increase in unemployment of almost 24%. This was not observed either during the global financial crisis or during the Great Depression of the 1930s. Every 1.5 million initial applications increase unemployment by 1 percentage point, and in less than two months, the US economy broke the unemployment record of 23.6% achieved during the Great Depression.

Economists attribute this to the coronavirus, which has hit the US economy. Many US companies announced layoffs, and authorities ordered non-vital companies to close their offices and stores due to the coronavirus epidemic. Eventually, the weekly growth rate of applications far exceeded the previous record level of 695,000 reached in October 1982. Then the number of initial claims filed in four weeks amounted to 2.7 million. From March 29 to April 4, 2020, unemployment benefits were received by 12 million Americans, which also became a new record. The previous record was set a week earlier when 7.4 million people received benefits - the highest since the recession of 2007-2009.

This indicator reflects the state of the labor market. An increase in value negatively affects consumption and economic growth. Under normal conditions, a high result weakens the US dollar, while a low one strengthens it. However, in the current environment (the coronavirus pandemic and a sharp economic slowdown), the reaction of market participants to the publication of this report by the US Department of Labor can be completely unpredictable.

Friday, May 8

On this day, Europe will celebrate Victory in the 2nd World War. European banks will be closed; trading volumes will be low.

**12:30 USD Average hourly wages. Non-Farm Payrolls. Unemployment

rate**

These are the most important indicators of the state of the labor market in the US in April. Forecast: +0.2% (against +0.4% in March) / -20,000,000 (against -701,000 in March) / 14.0% (against 3.5% in February and 4.4% in March ), respectively.

In general, the indicators can be described as disappointing, but understandable due to massive layoffs in American companies and the closure of offices and shops because of the coronavirus.

Prior to coronavirus, the US labor market remained strong, indicating the stability of the US economy and supporting dollar quotes.

Predicting market reactions to the publication of indicators is often difficult, because many indicators for previous periods may be revised. Now it will be even more difficult to do, because the economic situation in many other large economies is no better. In any case, during the publication of data from the US labor market, a surge in volatility is expected in trading not only in the USD, but throughout the financial market. The most cautious investors may prefer to stay out of the market during this period of time.

12:30 CAD Unemployment rate in Canada

Statistics Canada will publish data on the country’s labor market for April.

Unemployment in January in the country decreased slightly (to 5.5% compared to 5.6% in December), but rose again to 5.6% in February and 7.8% in March. If unemployment continues to rise, the Canadian dollar will decline. If the data turn out to be better than the previous value, the Canadian dollar will strengthen. A decrease in unemployment is a positive factor for the CAD, an increase in unemployment is a negative factor. Forecast for April: 7.2%.

Price chart of GBPUSD in real time mode

![Economic calendar for the week 04.05.2020 – 10.05.2020][1]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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