Most Important Economic Events of the Week 05.23.2022 – 05.29.2022

The dollar weakened last week, and the DXY dollar index fell to the levels of 3 weeks ago. It is likely that market participants are still under the impression of the statements of Fed Chairman Jerome Powell, which he made last Tuesday, speaking at the Future of Everything festival organized by the Wall Street Journal. Although Powell confirmed the intentions of the Fed leadership to fight against inflation that has grown in the US, the highest in the last 40 years, market participants seem to have expected tougher statements from him.

In his opinion, if the economic indicators are in line with expectations, it would be appropriate to raise interest rates by 50 basis points at the next two meetings.

However, according to Powell himself, these upcoming interest rate hikes are, for the most part, already priced in.

However, economists expect the dollar to rise again, and one of the reasons for this is the Fed's monetary policy, the most tight among other major world central banks. At the same time, the American stock market remains under severe pressure, declining in its main indices S&P 500, Nasdaq100, DJIA. Investors prefer the dollar to the risky assets of the stock market.

Next week, market participants will pay attention to the publication of important macro statistics for New Zealand, Germany, the Eurozone, Great Britain, the USA, Canada, as well as the results of the New Zealand central bank meeting.

Of the most significant macroeconomic data, the publication of which is expected next week, it is worth noting the following:

*) new events can be added to the calendar and/or some scheduled events canceled during the coming week

**) specified time – GMT

Monday, May 23

16:15 GBP Speech by the head of the Bank of England Andrew Bailey

Financial market participants expect Andrew Bailey to clarify the situation regarding the further policy of the UK central bank. Volatility during the speech of the head of the Bank of England usually rises sharply in the quotes of the pound and the London Stock Exchange FTSE index, if he gives any hints of tightening or easing of the Bank of England's monetary policy. Probably, Andrew Bailey will also give explanations regarding the decision made by the Bank of England on the interest rate and will touch on the state and prospects of the British economy after Brexit and the partial lifting of quarantine restrictions due to the coronavirus. If Bailey does not touch on monetary policy issues, then the reaction to his speech will be weak.

22:45 NZD Retail Sales (1st Quarter)

The Retail Sales Report is published by Statistics New Zealand. Changes in retail sales are generally considered an indicator of consumer spending. In general, a high reading is a positive factor for the NZD, while a low reading is a negative factor. In the 3rd quarter of 2021, retail sales decreased by -8.1% due to Covid-19 quarantine restrictions, and increased by 8.6% in the 4th. The NZD will strengthen if the data is better than previous values. A weak report will negatively affect the NZD.

Tuesday, May 24

07:30 EUR Markit Economics Business Activity Index (PMI) in the manufacturing sector of the German economy (preliminary release). Composite index (PMI) of business activity in the German economy according to Markit Economics (preliminary release)

The PMI business activity index in the manufacturing sector of the German economy is an important indicator of the business environment and the overall state of the German economy. This sector of the economy forms a significant part of Germany's GDP. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Previous monthly readings: 54.6, 56.9, 58.4, 59.8, 57.4, 57.4, 57.8, 58.4, 62.6, 65.9, 65.1, 64.4, 66.2, 66.6, 60, 7, 57.1, 58.3, 57.8. The growth of the indicator above the previous values will support the euro (in the short term). The data is worse than the forecast and / or the previous value will have a negative impact on the euro. Forecast for May: 54.0.

The composite PMI business Activity index in the German economy is an important indicator of the business environment and the overall state of the German economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Previous monthly values: 55.8, 55.1, 49.9, 52.2, 52.0, 55.5, 60.0, 62.4, 60.1, 56.2, 55.8, 57.3, 51.1, 50.8, 52.0, 51.7. The data is worse than the forecast and / or the previous value will have a negative impact on the euro. Forecast for May: 54.0.

08 00 EUR Composite index (PMI) of business activity in the manufacturing sector of the Eurozone economy according to Markit Economics (preliminary release)

The PMI manufacturing PMI is an important indicator of the overall health of the European economy. A result above 50 is seen as positive and strengthens the EUR, while a result below 50 is seen as negative for the euro. Previous monthly values: 55.8, 54.9, 55.5, 52.3, 53.3, 55.4, 54.2, 56.2, 59.0, 60.2, 59.5, 57.1, 53.8, 53.2, 62.5, 48.8, 47.8, 49.1, 45.3. Data worse than the forecast and/or the previous value will have a negative impact on the euro. Forecast for May: 55.3.

08:30 GBP Index (PMI) of business activity in the services sector of the UK economy according to Markit Economics (preliminary release)

The PMI business activity index in the UK services sector is an important indicator of the state of the British economy. The services sector employs the majority of the UK's working-age population and accounts for approximately 75% of GDP. The most important part of the service sector is still financial services. If the data is worse than the forecast and the previous value, the pound is likely to decline sharply in the short term. The data is better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is seen as positive and strengthens the GBP, below 50 - as negative for the GBP.

Previous values of the indicator: 58.9 in April, 62.6 in March, 60.5 in February, 54.1 in January, 54.1 in January, 53.6 in December, 58.5 in November, 59.1 in October, 55.4 in September, 55.0 in August, 59.6 in July, 62.4 in June 2021 after falling to the levels of 29.0 in May, 13.4 in April, 34.5 in March 2020. Forecast for May: 57.3.

Wednesday, May 25

02:00 NZD RB of New Zealand interest rate decision. RBNZ accompanying statement

Subdued economic growth (New Zealand GDP growth has slowed since the second half of 2018) and a weakening labor market, as well as an escalation of international trade wars and a worsening global economic outlook, have forced the Reserve Bank of New Zealand to keep interest rates low for a long time. An additional and unforeseen risk to the global and New Zealand economies was the coronavirus epidemic.

However, following the results of the meetings held in October and November, the Reserve Bank of New Zealand (for the first time in 7 years) raised the key interest rate to 0.50%, and then to 0.75%. In February and April 2022, the interest rate was raised again to 1.5% to ease inflation and contain rapidly rising house prices. Earlier, the RBNZ said that the economy no longer needs the current level of monetary stimulus.

It is expected that at this meeting the RBNZ will raise the interest rate again, and may also speak in favor of a further increase in the interest rate at the next meetings. Market participants following the NZD quotes need to be prepared for a sharp increase in volatility during this period of time.

In the accompanying statement and comments, the RBNZ management will provide an explanation of the decision on the interest rate and comments on the economic conditions that facilitated the adoption of this decision.

At this time, the volatility in the quotations of the New Zealand dollar may rise sharply.

Earlier, the RBNZ stated that against the background of "many uncertainties", monetary policy "will remain soft in the foreseeable future", but "may be adjusted accordingly".

03:00 NZD RBNZ press conference

During the press conference, the head of the RBNZ Adrian Orr will make an explanation of the bank's decision. His speeches often serve as an unofficial source of information on the future direction of the RBNZ's monetary policy. In his opinion, the country's monetary policy should correlate with the dynamics of employment and financial stability of the state.

Earlier, the RBNZ stated that against the background of "many factors of uncertainty" monetary policy "will remain soft for the foreseeable future", but "may be adjusted accordingly".

In any case, volatility in the New Zealand dollar trade is expected to rise during the RBNZ press conference.

11:05 JPY Speech by the Governor of the Bank of Japan Kuroda

During his speech, the head of the Bank of Japan Kuroda is likely to give some comments on the bank's monetary policy. "It is necessary to patiently continue easing monetary policy," Kuroda, the Head of the Bank of Japan, has been saying almost traditionally lately. Markets usually react noticeably to Kuroda's speeches if he touches on the topic of monetary policy and makes unexpected statements. Volatility at such moments usually grows not only in the yen quotes, but throughout the Asian and global financial markets. If he does not touch on monetary policy issues, the reaction to his speech will be weak.

12:30 USD Orders for durable goods. Orders for capital goods (excluding defense and aviation)

This indicator reflects the value of orders received by manufacturers of durable goods and capital goods (capital goods are durable goods used for the production of durable goods and services), involving large investments. Goods produced in the defense and aviation sectors of the American economy are not included in this indicator. A high result strengthens the USD. Previous values of the indicator "orders for durable goods": +1.1% in March, -2.1% in February, +1.6% in January, +1.2% in December, +2.6% in November, -0.4% in October, -0.3% in September 2021.

Previous values of the indicator "orders for capital goods excluding defense and aviation": +1.3% in March, -0.2% in February, +0.9% in January, +0.4% in December, -0.1% in November, +0.7% in October, +0.8% in September 2021.

In theory, the relative growth of the indicator has a positive effect on the dollar, while the decline in the indicator is negative. The market reaction to its negative value can also be negative for the dollar in the short term. Data worse than the previous value and / or forecast will also negatively affect the dollar quotes.

Forecast for April: +0.6% (durable goods orders), +0.5% (capital goods orders, excluding defense and aviation). Better-than-expected data will have a positive impact on the dollar.

18:00 USD Minutes from the last meeting of the Federal Open Market Committee ("FOMC minutes")

The publication of the minutes is extremely important for determining the course of the current policy of the Fed and the prospects for raising interest rates in the US. The volatility of trading in financial markets during the publication of the protocol usually increases, since the text of the protocol often contains either changes or clarifying details regarding the results of the last FOMC meeting of the Fed.

Following the meeting, which ended on March 15-16, the leaders of the central bank raised the interest rate by 0.25% (for the first time since 2018) and announced their intention to raise interest rates another 6 times in 2022, also allowing for the possibility of a tougher decision. The Fed will also start cutting its balance sheet "at the next meeting", that is, potentially as early as June.

Economists and market participants are now evaluating how effective the Fed will be in dealing with inflation, which has reached its highs in the past 40 years.

The soft tone of the protocol will have a positive impact on stock indices and negatively on the US dollar. The harsh rhetoric of the Fed's leaders regarding the prospects for monetary policy will push the dollar to further growth.

Thursday, May 26

European countries celebrate Ascension Day. Banks and stock exchanges are closed on this occasion, and therefore trading volumes during the European session will be low.

12:30 USD Annual US GDP for the 1st quarter (Preliminary (Second) Release)

GDP data is one of the key data (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; a weak GDP report negatively affects the US dollar. In the previous 4th quarter, GDP grew by +6.9%, +2.3% in the 3rd quarter, in the 2nd quarter of GDP - by +6.7%, in the 1st quarter of 2021 by +6.3%. If the data points to a decline in GDP in the 1st quarter of 2022, the dollar will be under pressure. Positive GDP data will support the dollar and US stock indexes. Forecast: -1.3% (1st estimate was -1.4%).

12:30 CAD Retail Sales Index

The Retail Sales Index is published monthly by Statistics Canada and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the near term. An increase in the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. The previous index value (for February) is +0.1%. If the data for March turns out to be weaker than the forecast and/or the previous value, the CAD may decline sharply in the short term. Forecast: (for March): +1.4%.

Friday, May 27

01:30 AUD Retail Sales

The Retail Sales Index is published monthly by the Australian Bureau of Statistics and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the health of the retail sector in the near term. A rise in the index is usually positive for the AUD; a decrease in the indicator will negatively affect the AUD. The previous value of the index (in March) was +1.6% (after increasing by +1.8% in January in February, decreasing by -4.4% in December of 2021). If the data turns out to be weaker than the previous value, then the AUD may sharply decline in the short term, above the previous values, then the AUD is likely to strengthen. Forecast for April: +1.0%.