EUR/USD Weekly Forecast - 28 May

Saturday, May 26 2018

EUR/USD failed in another attempt to recover and hit 6-month lows and is already more than 900 pips off the highs. German GDP disappointed with a growth rate of only 0.3% q/q in the first quarter while inflation was confirmed at low levels. Italy moved to the forefront with the formation of a government that plans to cut taxes and spend money, enlarging the debt. More radical plans such as writing down €250 billion of debt were dropped, but markets became jittery and the euro suffered. In the US, 10-year bond yields reached new highs at 3.13%, helping the US Dollar. American data was alright but not outstanding.

Major events in the coming week:

Monetary data: Tuesday, 8:00. The significant slowdown in M3 Money Supply to 3.7% y/y in March is a worry to the European Central Bank. On the other hand, Private Loans accelerated to 3%. M3 Money Supply is expected to accelerate to 3.9% y/y and private loans to 3.2% this time.
German Retail Sales: Wednesday, 6:00. After a drop of 0.6% in March, a bounce of 0.5% is predicted for April. There are some tentative signs of a Spring pickup.
German CPI: Wednesday, during the morning, and the all-German figure at 12:00. Prices remained flat in April. A monthly rise of 0.3% is expected for May.
French Consumer Spending: Wednesday, 6:45. Expected to rise by 0.2% vs 0.1% in March.
French GDP: Wednesday, 6:45. The initial read for French GDP growth in the first quarter of 2018 showed a modest rate of 0.3%. The update is expected to confirm the early estimates.
Spanish CPI: Wednesday, 7:00. Spain saw a further deceleration in y/y growth in April: 1.1%. A significant jump to 1.7% is forecast for the preliminary read for May.
German Unemployment Change: Wednesday, 7:55. Germany’s strong economy sees a persistent drop in the number of the unemployed. A fall of 10K is expected.
French CPI: Thursday, 6:45. France saw prices rise by 0.1% m/m, faster than Germany, but still very slow. Another rise of 0.2% is expected.
Inflation data: Thursday, 9:00. Inflation decelerated in the euro area, with 1.2% on the headline and 0.7% on the core. A bounce is expected: 1.6% in headline inflation and 1% in core inflation.
Unemployment Rate: Thursday, 9:00. The unemployment rate in the 19-country bloc has been dropping steadily but got stuck at 8.5% in March. A drop to 8.4% is on the cards.
Manufacturing PMI: Friday morning: Spain at 7:15, Italy at 7:45, final French figure at 7:50, final German number at 7:55 and final euro-zone measure at 8:00. Expectations are for a confirmation of the flash numbers, but revisions are quite common.