Forex Weekly Outlook: Economic woes Continue but some signs of relief

The major economies continue to struggle with the devastating effects of the Covid-19 virus, but there are signs of recovery in the manufacturing and service sector and employment numbers have also improved.

Across the eurozone and in the UK, Manufacturing and Services PMIs accelerated in June. The ECB published the minutes of its last policy meeting. At the meeting, the bank increased its pandemic emergency purchase program (PEPP) by EUR 600 billion, to 1.35 billion.

In the U.S., manufacturing improved sharply, as Manufacturing PMI climbed from 39.8 to 49.6 points. The estimate stood at 50.0, which separates contraction from expansion. Final GDP for the first quarter showed a decline of 5.0%, unchanged from the advance estimate. Unemployment claims dropped from 2.43 million to 2.12 million, which was within expectations.

1. German Preliminary CPI: Monday, All Day. Inflation levels remain low across the eurozone. German inflation declined by 0.1% in May. However, analysts expect a rebound in June, with an estimate of 0.3%.
2. Chinese Manufacturing PMI: Tuesday, 1:00. Investors keep a close eye on key Chinese indicators, as China is Australia’s largest trading partner. Manufacturing PMI has been just above the 50.0 level for the past two months, which separates contraction from expansion. The estimate for June stands at 50.4 points.
3. UK Final GDP: Tuesday, 6:00. Second-estimate GDP for the first quarter is expected to confirm the initial read, with a forecast of -2.0 percent. This follows a flat 0.0% in Q4 of 2019.
4. Eurozone Inflation: Tuesday, 9:00. Consumer inflation started the year at 1.4%, but this shriveled to just 0.1% in May. The June estimate stands at -0.1 percent. The core figure has been much stronger, with back-to-back readings of 0.9 percent. Little change is projected for June, with a forecast of 0.8 percent.
5. Fed Chair Powell Testifies: Tuesday, 12:30. Powell will before the House Financial Services Committee, along with Treasury Secretary Steven Mnuchin. The testimony could have a significant impact on the movement of the dollar.
6. Canadian GDP: Tuesday, 12:30. Canada releases GDP every month, unlike other major economies, which publish GDP each quarter. In March, the economy showed the effects of Corvid-19, with a sharp decline of 7.2 percent. Still, this was better than the forecast of 9.0 percent. Analysts are braced for an even sharper decline in April, with a forecast of -10.5 percent.
7. US Chicago PMI: Tuesday, 13:45. This important gauge of economic activity has slowed over three straight months, falling to 32.3 in May. The index is expected to rebound in June, with a forecast of 42.0 points. 
8. US ISM Manufacturing PMI: Wednesday, 14:00. The index continues to lose ground and has been in contraction territory since February, with readings below the 50-level. The PMI rose from 41.5 to 43.1 in May and is expected to climb to 49.0 in the June release.
9. FOMC Meeting Minutes: Wednesday, 18:00. The Fed will publish the minutes of the June meeting. The message from that meeting was that the Fed was focused on keeping markets functioning and financial conditions easy and this will likely be reiterated in the minutes.
10. US Non-Farm Payrolls: Friday, 12:30. After a gain of 2.5 million jobs in May, analysts are projecting a gain of 3.0 million in June. However, wage growth declined by 1.0% in May and another decline of 0.5% is projected. The unemployment rate fell to 13.5% in May and is expected to drop to 12.5% in June.