Normally, the release of US Non-farm Payrolls takes center stage in the forex markets, as the figure tends to spark significant volatility and can shape interest rate expectations for the Federal Reserve. However, Wednesday’s FOMC rate decision may steal the limelight, as futures are currently pricing in an 82% chance of a 25bp cut to 2.00% and an 18% chance that the Fed will leave rates unchanged.
• US S&P/Case Schiller House Prices, Consumer Confidence – April 29
On Tuesday, the release of US economic data will likely highlight some of the reasons why traders are ramping up speculation that the country is in midst of a recession. Indeed, at 9:00 EDT, the S&P/Case-Schiller index of home prices is likely to fall sharply for the fourteenth consecutive month. Later in the morning at 10:00 EDT, the Conference Board’s consumer confidence index is forecasted to fall to a nearly 15-year low of 61.1 from 64.5, which won’t be entirely surprising as rocketing food and energy prices combined with the collapse of the US housing sector and tightening credit conditions have sparked widespread pessimism throughout the financial markets. Furthermore, the labor markets have started to deteriorate, as the unemployment rate has slowly ticked higher in recent months and things are only expected to get worse.
• US Gross Domestic Product – April 30
The ongoing housing recession leads many to believe that the US economy is in the midst of a real economic recession, and the upcoming GDP report will go a long way to dispel or confirm such pessimistic sentiment. The median consensus forecast call for the slowest quarterly GDP gain since the fourth quarter of 2002, but it is important to note that most do not predict a negative GDP release. A below-zero print would almost certainly produce a sharp drop in the US dollar, as it would be clear proof that the world’s largest economy is in a stage of contraction and would quickly feed into expectations for the afternoon’s Federal Reserve interest rate announcement. Negative growth figures would arguably justify further FOMC rate cuts, which would widen the US dollar’s yield disadvantage against major forex counterparts. On the other hand, a reading in line with expectations isn’t likely to spark much reaction as traders will be anxiously awaiting the FOMC decision.
• FOMC Rate Decision – April 30
Heightened uncertainty surrounding the US Federal Open Market Committee’s interest rate decision at 14:15 EDT virtually guarantees volatility across almost all asset classes - making it the most important event to watch in the week ahead. Economists overwhelmingly expect the Fed to cut its short-term policy rate by 25 basis points to 2.00 percent, but the vote for the March reduction in the fed funds rate had two dissenters, both of whom voted in favor of “less aggressive” policy given upside inflation risks. Indeed, fed fund futures are now pricing in an 82 percent chance of a 25bp rate cut on April 30 and a 18 percent chance of no change in policy. Nevertheless, worse-than-expected economic releases ahead of the decision will lead the markets to fully price in a reduction in rates, and the market’s doubts may be unwarranted as the FOMC is unlikely to pause this week. However, traders should look for our FOMC preview on www.dailyfx.com on Tuesday for other factors to watch, such as wording in the policy statement.
• US ISM Manufacturing – May 1
The Institute for Supply Management is expected to report at 10:00 EDT that their survey of conditions in the manufacturing sector fell to a five-year low of 48.0 in April from 48.6. Data from the Philadelphia and Richmond Federal Reserve regions showed a major deterioration during the month, as the former hit the worst levels since February 2001 and remains very much in contractionary territory. That said, these are both very volatile reports, but given broadly weak domestic demand in the US, the risks are tilted to the downside for the ISM manufacturing release. The employment component will also be watched carefully as a gauge for Friday’s Non-farm Payroll report.
• US Non-Farm Payrolls – May 2
The US Non Farm Payrolls report is one of the most consistently market-moving economic releases on any calendar, and Friday’s result should be no exception. Indeed, this news release at 8:30 EDT and the number is notoriously difficult to handicap, so traders should keep an eye out for the NFP Preview on Thursday in order to get a sense of how the data will fare. Our bias as of Monday: NFPs could fall negative for the fourth consecutive month.
See the DailyFX Calendar for a full list and timetable of upcoming event risks.