Forex Weekly Outlook For May 3-10 – BoE Policy Decision, US NFP Loom Big

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The FOMC remained in dovish mode despite promising US numbers. The UK economy is gradually reopening, but the eurozone is still hampered by a slow vaccine rollout.

GBP/USD dropped sharply late in the week and the pair ended the week just above the 1.38 line. USD/CAD dropped to its lowest level since February 2018 last week, as the pair fell 1.57%. EUR/USD sustained sharp losses on Friday and recorded its first losing week in a month.

In April, German Inflation rose above the 2% level for the first time in two years. In the eurozone, CPI is expected to rise to 1.6% in April, up from 1.3%. German GDP fell by 1.7% in Q1 from the previous quarter, as COVID-19 caused a downturn in the economy. Canada’s GDP posted a gain of 0.4% in February, down from 0.7% a month earlier.

The US dollar dipped after the FOMC meeting, as the Fed said it was premature to discuss tapering. US GDP rose 6.4%, beating the forecast of 6.1%. The robust reading was another sign that the US economic recovery is in full swing.

  1. US ISM Manufacturing PMI: Monday, 14:00. Manufacturing continues to show strong growth, as the economic recovery is galloping at a quick pace. The PMI improved to 64.7 from 60.8 in February and the March estimate stands at 6
  2. UK Manufacturing PMI: Tuesday, 8:30. Manufacturing continues to show strong growth. The PMI rose to 60.7 in April, up from 58.9. The upcoming reading is expected to confirm the initial release. 
  3. BoE Rate Decision: Thursday, 12:00. The BoE is widely expected to maintain the Official Cash Rate at 0.10% and asset purchases at GBP 895 billion. The economy is doing markedly better than the it appeared in the last meeting, which took place in March, due to a successful vaccine rollout. The bank is not expected to taper at the upcoming meeting, but if policymakers do make this move, the pound could rise significantly. The BoE is expected to maintain interest rates at 0.10%.
  4. US Employment Report: Friday, 12:30. The estimate for non-farm payrolls stands at 975 thousand, and a print above 1 million is certainly possible. Wage growth remains subdued, and the April estimate stands at 0.0%.

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