Forex – EUR/USD Weekly Outlook: May 2-6
Written on April 30, 2011 by Julia Woodard
Forex Pros – The euro advanced to a 16-month high against the U.S. dollar last week, boosted by expectations that the European Central Bank will raise interest rates ahead of the U.S. Federal Reserve.
EUR/USD hit 1.4881 on Thursday, the pair’s highest since December 7, 2009; the pair subsequently consolidated at 1.4807 by close of trade on Friday, gaining 1.66% over the week.
The pair is likely to find support at 1.4631, last Wednesday’s low and resistance at 1.5090, the high of December 4, 2009.
Data on Friday showed that inflation in the euro zone rose to 2.8% year-on-year in April from 2.7% a month earlier, the highest level since October 2010, when it was 3.2%. The rate of inflation remained above the ECBs goal of just under 2% and fuelled expectations for further rate hikes by the central bank in the coming months.
The ECB raised its key rate by a quarter point in April to 1.25%, the first rate change since 2009, amid concerns about the impact on consumer prices of rising costs of energy and food.
In contrast, Fed Chairman Ben Bernanke, in his first ever post-policy meeting press conference on Wednesday said that the central bank was in no rush to tighten monetary policy with the jobs market still in a very, very deep hole.
Elsewhere, on Thursday, the Commerce Department said U.S. economic growth slowed to a 1.8% annual rate in the first quarter, from 3.1% in the prior three months.
A separate report from the U.S. Labor Department said initial jobless claims jumped by 25,000 to 429,000 last week. Economists had forecast claims would fall to 390,000.
Looking ahead, markets will be looking to Friday’s U.S. non-farm payrolls report to gauge the strength of the jobs market while the ECB is to announce its minimum bid rate.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, May 2
Markets in the euro zone will remain closed for the May Bank Holiday. Meanwhile, ECB President Jean-Claude Trichet is to speak in Frankfurt; his comments will be closely watched or any possible clues to the future direction of monetary policy.
Also Monday, the U.S. Institute for Supply Management is to publish its manufacturing PMI, a leading indicator of economic health.
Tuesday, May 3
The U.S. is to release government data on factory orders, a leading indicator of production.
Wednesday, May 4
The euro zone is to release official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
Later in the day, the U.S. is to publish data on non-farm payrolls compiled by payroll processing firm ADP, which leads government data by two days. Meanwhile, the U.S. Institute for Supply Management is to publish its non-manufacturing PMI. The country is also to publish government data on crude oil stockpiles.
Thursday, May 5
In the euro zone, Germany is to publish official data on factory, a leading indicator of production. In addition, the ECB is to announce its minimum bid rate. The announcement will be followed by a closely watched press conference.
The U.S. is to publish its weekly report on initial jobless claims as well as preliminary data on labor costs and productivity. The country is also to release official data on natural gas inventories. Also Thursday, Fed chair Ben Bernanke is to speak at a public engagement; his comments will be closely watched for any clues to the future possible direction of monetary policy.
Friday, May 6
In the euro zone, Germany is to publish official data on industrial production, a leading indicator of economic health. The U.S. is to round up the week by publishing key government data on non-farm payrolls as well as data on the country’s unemployment rate and average earnings.
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