Forex – Five events to mark on your trading calendar

The dollar ended the week at its strongest level in a month after some better-than-expected US retail sales figures boosted demand. Federal funds futures trading still points to a low chance of the Fed increasing rates, but markets are once again looking at the US economy in a positive light.

Elsewhere, Brexit fears continue to stalk sterling pairs, while for the euro all eyes are on the early June meeting of the European Central Bank.

Ahead of these events, there are several important data releases coming up this week.

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US Inflation

 

Perhaps the most important data release is the US inflation figures due out on Tuesday. While the latest jobs report came in below par, there are signs that wages are accelerating. Meanwhile, retail sales growth hit 1.3% in April as consumers loosened purse strings, which bodes well for inflation. Core inflation, which stripes out food and energy, has been running at 2.2% and another increase could put a June rate hike by the Fed back on the agenda.

UK Inflation

 

Tuesday also sees the release of April inflation data for the UK, which is going to be closely scrutinised as it comes shortly after the Bank of England released its second inflation report of the year last week.  Inflation ticked up to 0.5% in March and investors will want to see if there is any further movement or if consumers are holding back from purchases ahead of the EU referendum in June.

FOMC meeting minutes

 

On Wednesday, minutes from the Federal Reserve’s latest policy meeting will be released. The minutes provide detailed insight into the Fed’s assessment current risks facing the US economy. Investors will look for guidance on the likely future course of rates and importantly for the near-term, whether policymakers think there is a chance of a hike in June. A change then has been all but ruled out by markets but not by policymakers – the minutes ought to help explain more.

Japan growth

 

Also on Wednesday, Japan will provide markets with an initial assessment of GDP in the first quarter. Producer price deflation has slumped to its worst level in six years and other data has not been positive. After a 1.1% contraction in the final quarter of 2015, analysts polled by Reuters expect paltry growth of 0.2% in the first quarter. A soaring yen has not helped. Anaemic growth will put more pressure on the Bank of Japan to further loosen monetary policy when it next meets.

G7

 

Staying in Japan, Tokyo is host to the G7 meeting on Friday. Forex markets will be eyeing an official communication on currency strength. There has been some speculation that the G20 meeting earlier this year led to at least a tacit agreement among nations to coordinate monetary policy a little better. The dollar has weakened a little, relieving pressure on emerging markets. But the euro and yen have stiffened and there is little doubt that exchange rates will be on the agenda, even if they’re discussed unofficially.