Weekly Outlook | PMI data to guide markets
Updated Updated Tue, 2025 May 20 02:38
Important events this week:
Friday last week ended with a downgrade of the US by the rating agency Moody’s. They followed Fitch and S&P, which did already downgrade the US some time ago. Moody’s did cut the rating by one notch from AAA to Aa1 with the reason that that budget deficit comes in at USD 2 trillion, which marks 6% of the current GDP or a total of nearly USD 37 trillion. Furthermore, also the biggest economy in the world showed much weaker consumer sentiment data, which came in at a record low, while inflation expectation keeps rising. The data reveals that the majority of respondents to the survey expect the data to weaken due to the tariffs.
This week will feature important purchasing manager indices from the Eurozone and the US as we discuss below and some retail sales data from the UK and Canada, which are not expected to move markets much.
– AU- Interest Rate Decision- The interest rate decision from the RBA is likely going to be the most important news event on the economic calendar this week. It is expected that the Central Bank will cut rates by 25 basis points. In general, a rate- cut would mean that a currency loses some steam and, in this case, this might as well happen.
AUDUSD, weekly chart
If we take a look at the AUDUSD currency pair above, the market seems capped just below the 50- moving average. This might continue to act as a strong resistance zone for now. Any break below the 0.6350 zone would indicate that prices might fall further. The positive trend in equities could then also come to a pause. The Aussi is a good indicator for the equity market. If the currency falls, indices like the S&P 500 might hence face some corrective pattern as well.
Only a break above the psychological zone of 0.6500 could add some positive price pattern causing the long- term outlook based on the monthly chart to continue. The interest rate decision will follow on Tuesday, 20th May at 06:30 CET.
– various Flash PMI data- The PMI data might guide markets as well this week in particular with a slight positive trend being expected again. French and German services as well as manufacturing data is expected to rise further, which could help the positive trend of both currencies to continue. Similarly, also UK’s data is expected to remain positive, which could help pushing the Pound higher. Especially the GBPUSD currency pair might break to higher levels, as chart below shows.
GBPUSD, monthly chart
The monthly chart above shows, that it might not take much for the market to break the important resistance zone at 1.3400. The price could then be ready to push towards the 1.4000 range, supported by a stronger reading. The negative expectation of the PMI data from the US would also help such view, should the date come in line with expectation. The PMI data from various countries will be published on Thursday, 22nd May.
