Your Weekly Fundamental View (May 1-5)

May 01, 2017 09:00

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Need to know

The main focus of the trading week is on the US, Australia, and the EU. The central banks of both Australia and the United States will announce their interest rate decisions, release their monetary policy decisions, and offer official statements. Another key news event, the US Non-Farm Payroll (NFP) figures, will be released on Friday. Last but not least, both Federal Reserve (Fed) chair Yellen and ECB (European Central Bank) President Draghi are expected to speak this trading week.

Coming up

Bank holiday takes place on Monday, 1 May.

Many European countries and China have official public holidays on the 1st of May. The list of countries which are offering a national holiday include major financial hubs such as the UK, Germany, France, Italy and Switzerland.

Why should you care? The Forex, CFD, and financial markets could be slower and quieter in their price movements and volatility due to the fact that major financial hubs are having a day off.

Interest rate decision by the RBA (Australia) is announced on Tuesday, 2 May.

The Reserve Bank of Australia (RBA) is announcing its interest rate decision. The decision is made by the Reserve Bank Board members who need to reach a common consensus on the best rate for the country considering price stability, full employment, and the eneral economic prosperity of the Australian people.

Why should you care? The interest rate is a critical factor in the value of a currency. Higher interest rates are more attractive and increase demand whereas lower interest rates lead to lower demand. The previous rate is 1.5%, and the forecasted figure is 1.5%.(*)

British manufacturing PMI is announced on Tuesday, 2 May.

The PMI figure is an index based on surveyed purchasing managers in the manufacturing industry. The survey asks about 600 managers to rate the level of business conditions, including new orders, employment, and production.

Why should you care? A figure above 50.0 indicates industry expansion whereas a number below 50.0 indicates contraction. The previous figure is 54.2 and the current forecast is 54.0.(*)

German, EU and New Zealand unemployment figures are announced on Tuesday, 2 May.

Unemployment figures indicate the percentage of the work force that is unemployed and actively seeking employment. On Tuesday traders can expect multiple unemployment figures from Germany, the EU in total and New Zealand.

Why should you care? Full employment could lead later on to inflation which in turn could lead to a hike of the interest rate. A lack of employment could have the opposite effect. The previous EU unemployment rate is 9.5%, the forecast is 9.4%.(*) The previous German unemployment is 5.8%, the forecast is 5.8%.(*) Both the previous unemployment rate and current forecast for New Zealand is 5.2%.(*)

The US interest rate decision and FOMC statement take place on Wednesday, 3 May.

The Federal Reserve (Fed) of the United States is announcing its interest rate decision, which is a key part of monetary policy and currency valuation. The FOMC statement communicates the monetary policy towards the public, traders, and investors which indicates their voting, commentary, and their economic outlook.

Why should you care? The changes in the FOMC statement indicate how the board members have changed their view on the economic development of the US. The interest rate decision is expected to stay at 1.0%, the same as the previous announcement.(*)

ECB President and Fed Chair Speak on Thursday and Friday, 4 and 5 May.

The President of the ECB (European Central Bank) Draghi and the Fed (Federal Reserve - US Central Bank) Yellen are expected to speak. Draghi will offer a speech at the Jean Monnet Foundation in Switzerland whereas Yellen is expected to speak at Brown University in Providence.

Why should you care? The president of a central bank always receives attention when he or she speaks because of their influence on nation's or currency bloc's monetary policy and interest rate decisions.

Australian Monetary policy meeting minutes are released on Friday, 5 May.

The meeting minutes provide detailed records about how the Australian board members view the current and future economic conditions. The upcoming meeting offers more understanding and information what influenced their decision to set interest rates as they are.

Why should you care? Many factors influence an interest rate decision, which is a critical part of understanding the demand for any currency. Understanding how the board members of a central bank view and analyse those factors is of importance to all traders and investors.

US NFP figures and unemployment rate are announced on Friday, 5 May.

The Non-Farm Payroll (NFP) figures are one of the most important statistics during the month as they indicate the number of employed people in the US. Job creation is an important leading indicator of consumer spending. The US unemployment figure shows the percentage of the work force that is unemployed and actively seeking employment.

Why should you care? The figures that are higher or lower than the forecast tend to impact the financial markets. The NFP previous figure is 98k and the forecast is 185k.(*) The previous unemployment figure is 4.5% and the forecast is 4.6%.(*)

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Source: Unemployment rate in the US.

(*) Admiral Markets Calendar