EUR/USD. Preview of the week. ECB should shed light on its further actions to save the economy. Reports on GDP and unemployment


A new trading week on the forex market begins, and we have to figure out what to expect from this week and what its macroeconomic background will be. In most cases, traders continue to ignore macroeconomic reports, but we have already said that, sooner or later, traders will begin to pay attention to statistics again, and secondly, all published indicators provide grounds for conclusions about the general economic situation in that country. A clear understanding of the economic downturn in a country will provide an opportunity to conclude that it is attractive to invest in the national currency of this country. Thus, we advise you to pay attention to published reports, although there is no direct reaction of traders to them. The new trading week will be full of macroeconomic events of a different plan and degree of importance. There will be practically no news in the first two trading days of the week. Most likely, Donald Trump will speak every day. Accordingly, a certain fundamental background will be present these days. In addition, everything will depend on the nature of the latest information. Although now there isn't much to surprise the market participants. In pre-crisis times, any hint of Jerome Powell or Mario Draghi about a possible reduction or increase in the rate could lead to a strong market response. Therefore, the speeches of the top officials of each country were closely monitored. Now, when the Federal Reserve freely reduced the rate from 1.75% to 0.25% in a couple of weeks, and the EU and US governments sign new multi-billion dollar and trillion-dollar programs to help their economies every week, traders are no longer as tempted as before. It's also worth adding that all the news about the coronavirus has faded into the background. Market participants seem to have come to terms with the fact that the epidemic will continue until a vaccine is found. And according to the latest information from doctors, it should be expected no earlier than the end of 2020. Accordingly, the only way to counter the COVID-2019 virus remains quarantine. However, quarantine cannot last forever, otherwise after its completion there will be nothing to restore. Therefore, many countries have decided to gradually weaken quarantine measures despite the fact that new infections and deaths are still being recorded in their territories.

There will be few economic events in the European Union on Wednesday. We can only note the report on the consumer price index in Germany. However, as we said earlier, all German reports are interesting only from the point of view of the state of the strongest economy in the EU. According to preliminary estimates, inflation is expected to slow down to 0.6% in April from 1.4% in annual terms. Thus, approximately the same value can be expected in the bloc. However, inflation is now far from the most significant indicator, therefore, with a probability of 99%, no reaction will follow. It should also be remembered that inflation is now declining in many countries, mainly due to a sharp drop in oil prices.

The EU will release a variety of reports on Thursday. Everything will start with retail sales in Germany with a forecast of -7.5% m/m in March. Followed by inflation in France, GDP in Spain, inflation in Spain, inflation, GDP and unemployment in Italy. All these reports will be interesting in terms of understanding the impact of the coronavirus epidemic on the economies of these countries. Important data on the unemployment rate in Germany for April, with a forecast increase from 5% to 5.2%, will also be released on this day. A fairly small increase, but the European Union has taken the path of providing assistance not to the population itself, but to businesses, companies, and businesses, so that they do not lay off employees. This is why we do not expect Europe to face a strong increase in unemployment. The number of new unemployment benefits in Germany in April is projected at 70,000, which is not much for a time of crisis. Data that will be released later on includes, unemployment in the EU (an increase from 7.3% to 7.7% in March), inflation (preliminary value for April with a forecast of 0.0% y/y), and GDP (preliminary value first quarter of forecast 2.8% in y/y and 3.3% q/q). The figures are certainly terrible, but traders have long been prepared for this, since many rating agencies, investment banks and financial conglomerates, as well as the IMF and many central banks, voiced their forecasts for a contraction in the economy due to the pandemic. Thus, -3% of GDP in the EU is unlikely to surprise anyone. In Italy, GDP could fall by 5% q/q in the first quarter, but even this value is unlikely to surprise anyone, since it was Italy that suffered the most from the epidemic. A little later that day, decisions of the European Central Bank on deposit and key rates will be published and a press conference with Christine Lagarde will be held. These events are also extremely interesting. No one expects the ECB to lower rates, however, recall that the ECB did not use the key rate reduction tool since the crisis began. On the one hand, rates in Europe are already at a negative level and each subsequent decrease has a much weaker effect than the previous one, and on the other hand, it is still an effective method of stimulating the economy. Moreover, we recall that the European Council has not yet approved the 2-trillion package of assistance to the economy. Europe definitely needs new stimulus packages. Thus, Christine Lagarde can lift the curtain over the ECB's actions in the future.

Not a single important report is planned in the EU on the final trading day of the week. However, in this article we considered only European publications and events, and in addition to them there will be American ones, which will be considered in the GBP/USD article. As for European events, we can say that the key events of the week are the ECB meeting and data on GDP and unemployment in the EU. These events can cause traders to react and create additional pressure on the euro. Although now the situation is no better in America. But the US currency still has an advantage over the euro, as traders and investors are much more drawn to it in dark and dangerous times.


The technical picture of the EUR/USD pair shows that a new upward correction has begun and a consolidation has been made over the Kijun-sen critical line. Thus, a further downward movement has been called into question. At the same time, there are few fundamental and macroeconomic foundations for strengthening the euro. And it is unlikely that there will be more of them next week.

Trading recommendations for the EUR/USD pair:

We believe that the fundamental background can hold a certain influence in the upcoming week, as there will be important events. Low volatility of the euro/dollar pair may be observed on Monday and Tuesday, since no events are planned for these days either in the EU or in the US. The correction may continue on these days. However, we expect volatility to increase in the second half of the week.

The material has been provided by InstaForex Company -