John M. Bland
I highlighted in my previous weekly forex outlook how the "bond vigilantes" have started to come to life and they have in spades. While the 10-yr bund yield did not rise any further in the latest week, it has not corrected significantly from its recent spike. in the prior week Bund yields topped out at about 0.80% after trading to a low of abount 0.04% a few weeks earlier. In the latest week, 10-yr Bund yields continued to press against the top of their recent range reaching 0.77%. This was even though the European Central Bank (ECB) has been in the midst of an aggressive Quantitative Ease (QE) program designed to drive bond yields lower. Some are saying the European economy was already recovering on its own before the ECB's actions and that the program will likely have to be cut short earlier than planned.
U.S. Data Disappoint And Dollar Falls
On the other hand, U.S. economic data continue to disappoint. April Retail Sales data released in the latest week showed no growth when a snap-back from the winter slowdown had widely been expected. So the European economy is over-performing and the U.S. is under-performing, so the EUR gained further vs. the USD in the latest week. The likelihood of EURUSD reaching parity this year is fading into the sunset.
The upcoming week is an active one for data.
-- Monday, May 18 sees the Victoria Day Holiday in Canada and the National Association of Home builders (NAHB) Index from the U.S.
-- Tuesday May 19, features U.S. Inflation data, the volatile German ZEW Survey and final April CPI data for the Eurozone. The European Central Bank targets inflation. U.S. Housing Starts and Permits are slated as well.
-- Wednesday May 20, sees the latest U.K. Bank of England and U.S. policy meeting Minutes. In both cases, these reports usually provide insight into current policy.
-- Thursday May 21, will feature the first set of flash PMI estimates for May. Further, the U.K. will release the latest Retail Sales report, which provides insight into consumer behavior. The U.S. will release its most important housing statistic, which is Existing Homes Sales.
-- Friday May 22, sees a Bank of Japan policy decision and the German IFo Survey, which is one of the most closely followed German statistics. That session will also see Canadian CPI and Retail Sales data ahead of long holiday weekends in the U.S. and U.K.
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar
and the Forex Forum
for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland