Top Events to Watch This Week

United States:  By the end of last week, the U.S. Dollar turned lower as its bullish trend lost some steam on profit taking and on annual core inflation increasing by 2.1% and thereby failed to meet the 2.2% anticipated by economists. According to Fed Funds Futures, rate traders are now penciling in three additional rate hikes by the end of 2018 with a probability of 47.2%.

Technically, the DXY trend is bullish, but the Dollar index is close to ending its bullish trend, so we watch May 4 low for clues about the future direction.

In the week of May 14, the markets expect retail sales to increase by 0.4% m/m from 0.6% in March. We note that annual retail sales rose by 4.5% in March and have been volatile over the last few years, but the pace of the growth has been increasing from about 2% by the start of 2016. US industrial production is also on deck and is likely to remain solid in April after two months of above-trend growth. Markets expect headline growth of 0.4% m/m, driven by a pickup in manufacturing and continued outperformance for mining output.

Euro area: There are no market-moving reports this week. The second release of Q1 GDP will be published, as well as the final headline and core CPI inflation estimate.

United Kingdom: The British Pound will continue to garnish attention and volatility as the latest U.K. labor market report is expected to show that annual wage growth increased from 2.8% to 2.9%, while the headline unemployment rate should stay flat at 4.2%. Stronger than expected wage growth should strengthen the BoE’s base case to increase interest rates in the coming 12-months and should be able to help U.K. retail sales which have been faltering post the 2016 Brexit referendum.

Australia: The unemployment rate is anticipated to remain unchanged at 5.5%, while the Australian economy is anticipated to have added 30.3K new jobs. The unemployment rate has remained stable since mid-last year, and Australian inflation is soft. Thus we do not expect any major changes to the macroeconomic outlook of the Australian dollar, but any surprises in the data could rattle the AUD.

Central Banks: In Australia, the Reserve bank will release the minutes of its latest meeting. While in emerging markets, the central bank of Brazil is anticipated to cut the Selic rate by 25 basis points to 6.25%

Written by Alejandro Zambrano, Chief Market Analyst with TradeCaptain.com.