Forex Weekly Outlook Feb 29-Mar 4

The US dollar had a positive week, especially. The new month brings a rate decision in Australia, GDP data from Canada and Australia, and the full buildup to the all important US Non-Farm Payrolls.  These are the highlights for this week, Join us as we explore these major events coming our way.

Last week US Durable Goods Orders for January grew at the strongest pace in 10 months reaching 4.9% in January, following a 5.1% plunge in December. The reading exceeded market forecast of 3.0%, suggesting positive outlook for US manufacturers. Meanwhile, Core durable goods orders, excluding transportation, increased 1.8%, still the best release since June 2014. Furthermore, US job market data remained positive despite a 10,000 rise in the number of jobless claims.   According to the data, chances for a March rate hike are not very high but further monetary policy tightening is likely later n the year.  Let’s start,

1. Chinese PMIs: Tuesday: the government official one at 1:00 and the independent Caixin one at 1:45. The world’s No. 2 economy has seen slight contraction in the manufacturing sector according to both purchasing managers’ indices. The official one is expected to remain unchanged at 49.4. The independent Caixin one is  also predicted to remain unchanged at 48.4 points. Any fall will trigger worries.
2. Australian rate decision: Tuesday 3:30. The Reserve Bank of Australia maintained the official cash rate on hold at 2%. RBA Governor Glenn Stevens said low interest rates boost demand, while strict lending standards help to avoid risks in the housing market.  The housing market cools down according to expectations and does not require another rate cut in the near future. The labor market is in a growth trend and retail sales also expand. Economists still believe the RBA will cut rates in the coming months.
3. Canadian GDP data: Tuesday, 13:30. Canada’s economy recommenced its expansion in November, growing  by 0.3% from October, mainly due to an increase in trade, manufacturing, oil and gas extraction. The reading followed flat growth in October and a 0.5% contraction in September. The increase was in line with market forecast. However, despite the firm increase in November, fourth-quarter growth is likely to remain unchanged, although many analysts believe the sluggish growth rate is only temporary. Canadian GDP is expected to reach 0.1% in December.
4. US ISM Manufacturing PMI: Thursday, 15:00. The U.S. manufacturing sector remained in contraction for a fourth straight month in January but at a decline was slower than in the previous month. The index increased 0.2% to 48.2. Economists expected a reading of 48.6. Employment declined to a six-and-a-half year low falling to 45.9 and the new orders index increased to 51.5, the highest since last August, from 48.8.   Manufacturing PMI is expected to reach 48.5  this time.
5. Australian GDP data: Wednesday, 0:30. Australian economic growth picked up in the third quarter of 2015, increasing 0.9% leaving the annual rate of growth at 2.5%. analysts expected a quarterly increase of 0.8%, with the annual rate ticking up to 2.4%.  Australian economy has been in expansion over the last 24 years withstanding the Asian and global financial crises. Exports rose 4.6% while imports fell 2.4%. Public sector investment fell 9.2% in accordance to the fall in military spending. Consumer spending surprised with a 0.7 rise on the quarter and a 2.7% annual increase. Australia is expected to grow 0.5% in the last quarter.
6. US ADP Non-Farm Employment Change: Wednesday, 13:15. U.S. private  employment added 205,000 jobs in January following 267,000 in December according to the ADP report. The strong dollar and sluggish global demand weighed on manufacturers and weaken growth in the first three months of 2016. Economists expected a 193,000 job addition in January. Private hiring declined lower than in December amid a slowdown at the largest companies. Economists expect ADP payrolls to increase by 185,000.
7. US Unemployment Claims: Thursday, 13:30. The number of new claims for unemployment benefits edged up last week to 272 000 from 262,000 in the prior month but remained at low levels indicating strong labor market.  Economists estimated claims would reach 271,000 in the latest week. The four-week moving average of claims declined 1,250 to 272,000. Although analysts do not forecast a rate hike in March, they see possibility of an additional hike in the coming months due to the labor market resilience. The number of new claims for this week is estimated to rise by 271,000.
8. US ISM Non-Manufacturing PMI: Thursday, 15:00.  The US services sector’s activity stumbled in January, the posting the third straight month of lower growth. Activity fell to 53.5 from 55.8 in December. Markets expected a reading of 55.1 in January.  Ten of the 18 non-manufacturing industries surveyed reported expansion, led by finance and insurance. Eight said they were contracting, with mining, bearing the brunt of falling oil prices, at the top. The majority of responders were positive about business conditions but were more concerned about global conditions. Non-Manufacturing PMI is forecasted to reach 49.8 this time.
9. US Trade Balance: Friday, 13:30. US trade deficit increased in December to $43.4 billion  from $42.2 billion in the previous month. Imports increased, while exports declined. The strong dollar and poor global demand were the main reasons for the increase in deficit. Trade deficit in 2015 added up to $531.5 billion growing 4.6% more than in 2014. The dollar increased 9.2% against its main trading partners in 2015 strongly weighing on exports. Likewise, China’s economic weakness and the trade deficit with China might endanger US manufacturing even further. Trade deficit is expected to increase further to 43.5 billion.
10. US Non-Farm Payrolls: Friday, 13:30. U.S. monthly employment report showed the pace of jobs addition slowed in January. The Private sector added 151,000 positions, the lowest rate since February 2008. The reading followed a hefty job gain of 292,000 in December. However, rising wages and a low unemployment rate indicate the labor market recovery remains intact. Many analysts believe the lower jobs gain figure is not necessarily a bad sign and that the combination of strong wage growth and falling unemployment may prompt another rate hike in the coming months. US employment market is expected to add 195,000 in February and the unemployment rate is predicted to remain at 4.9% .

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.

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