Forex Weekly Outlook May 24-28 – US, German GDP Eyed

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The US and UK continue to show strong numbers, while the eurozone is lagging behind. The upcoming week is light on data, with a focus on GDP reports out of the US and Germany.

EUR/USD posted gains last week and briefly touched its highest level since January. The Canadian dollar posted small gains last week, as USD/CAD dropped close to the symbolic 1.20 level. GBP/USD posted a winning week for a third straight time.

Eurozone GDP contracted by 1.8% in Q1, after an identical drop in the fourth quarter. This points to an economy that is technically in recession. Eurozone Final CPI came in at 1.6% in April, confirming the initial read. Manufacturing continues to show strong growth, with PMI readings of 64.0 in Germany and 62.8 in the eurozone. Business activity is showing more moderate growth, as Services PMIs for Germany came in at 52.8 and the eurozone came in at 55.1 points.

In the UK, employment releases were positive. The number of unemployed persons fell by 15.1 thousand, compared to an expected rise of 25.6 thousand. Unemployment fell for a third straight month, dropping from 4.9% to 4.8%. Wage growth remained strong at 4.0%, but this was lower than the forecast of 4.5%

Inflation was higher in April, as the reopening of the UK economy has led to increased economic activity. Headline inflation climbed to 1.5% in April, up sharply from 0.7% beforehand. Core CPI rose to 1.3%, up from 1.1%. Canada’s Inflation outperformed in April, as CPI rose to 3.4%, up from 2.2% and above the consensus of 3.2%. BoC CPI climbed to 2.3%, up from 1.4% and above the forecast of 1.3%.

The ADP Employment Report showed that the economy created 351 thousand new jobs in April, up sharply from 266 thousand. In the US, the Services PMI sparkled with a read of 70.1, as the business sector showed unprecedented growth. This beat the estimate of 64.3. The 50-level separates expansion from contraction.

  1. German Final GDP: Tuesday, 6:00. The German economy contracted by 3.3% in Q4 on an annualized basis. We now await the data for the first quarter.
  2. US GDP: Thursday, 12:30. Second-estimate GDP is expected in at 6.4%, which would confirm the first estimate.
  3. French Inflation Report: Friday, 6:45. Inflation has been generally weak in the eurozone’s number two economy. The estimate for CPI for May is 0.3%.

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