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Majors, US Dollar Forecast

Forex Weekly Outlook March 13-17

The US dollar ended the week on the back foot despite the upcoming rate hike. Apart from the Fed decision, we have rate decisions also in the UK and Japan, US consumer confidence and housing data, and lots more. These are the main events on forex calendar for this week. Join us for our weekly outlook to explore these market movers.

US Nonfarm payrolls showed the US labor market created 235,000 new jobs in February, beating forecasts of 196,000 gain. In addition, the unemployment rate declined to 4.7% in the first full month of President Donald Trump’s term. Average hourly earnings rose sharply by a 2.8% on an annualized basis.  This should be good enough for the Fed to hike. In the eurozone, the ECB has expressed a bit more optimism or at least less urgency, and this gave a boost to the euro.  Let’s start:

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  1. US Producer Prices: Tuesday, 12:30.  US producer prices edged up 0.6%, recording their largest gain in four years due to increases in the cost of energy products, However, the strength of the dollar kept  inflation  tame. Economists expected a 0.3% rise. Despite this sharp gain, the PPI yearly growth remained unchanged at 1.6% as in the 12 months through December. Core PPI, a more reliable measure of underlying producer price pressures excluding food, energy and trade services increased 0.2% after gaining 0.1% in December. Producer prices are expected to rise 0.1% this time.
  2. UK jobs report: Wednesday, 9:30. The number of Britons claiming unemployment benefits dropped in January by 42,400, following a revised decline of 20,500 in December. It was the sharpest decline since the fourth quarter of 2013. In the last three months, unemployment fell by 7000 to 1.6 million. The unemployment rate is the lowest since 2005 with a reading of 4.8%. The number of new unemployed in the UK is expected to rise by 3,200 in February.
  3. US Inflation data: Wednesday, 13:30. The U.S. inflation jumped in January by 0.6%, the highest since February 2013, due to higher costs for gasoline and services indicating inflation is gaining momentum. This rise followed a 0.3% climb in December. Rising prices of energy clothing and new cars indicate inflation pressures are mounting amid healthy demand. Fed Chair Janet Yellen said that more interest-rate increases will be executed if inflation picks up and the labor market remains tight. US Consumer prices are estimated to remain unchanged while core inflation is expected to gain 0.2% in February.
  4. US Retail sales: Wednesday, 13:30. Retail sales for January picked up matching the rise in consumer confidence with 0.4% gain, exceeding modest forecasts of 0.1%. Furthermore, December’s retail sales were revised higher to a strong plus 1.0%. Excluding automobiles, retail sales soared a sharp 0.8% in January which again topped estimates. This upbeat data points to a strong momentum for consumer spending, being the most important sector in US economy. Retail sales are expected to increase by 0.2% and core sales are predicted to rise 0.1%.
  5. US Crude Oil Inventories: Wednesday, 14:30. U.S. crude oil inventories jumped to another record high, rising 8.2 million barrels in the week to March 3. Meanwhile, gasoline stocks have contracted by 6.6 million barrels, posting the largest one-week drop in nearly six years. Analysts expected crude stocks to rise by a mere 1.1 mlb. Crude stocks imports rose by 385,000 barrels per day while gasoline stocks fell by rising demand.
  6. US FOMC Economic Projections and rate decision: Wednesday, 18:00. The Federal Reserve’s rate hike on December 14 was a near certainty but not so for its  economic projections in light of the uncertainty surrounding the Trump administration’s fiscal policy. Fed Chair Janet Yellen noted that the U.S. central bank is “operating under a cloud of uncertainty at the moment” regarding impacts of the new government’s potential fiscal measures on the economy. The FOMC sees three rate hikes in 2017, instead of the two from September’s projections. But beyond 2017, the assessments are the same as in  September. Regarding growth projections, the Fed sees a 2% rise, falling to 1.8% in the longer run. The unemployment rate is estimated to reach 4.5% between 2017 and 2019 before rising to 4.8 percent in the longer term. At Federal Funds rate meeting in March The FOMC is expected to raise rates again, however, this time the Fed will make the decision on its own accord with no pressure either from markets or from its own prior signals to push ahead with an increase.
  7. New Zealand GDP  data: Wednesday, 21:45. New Zealand economy expanded more than expected in the third quarter, jumping 1.1% amid strong consumer spending and construction activity. The reading beat analysts’ forecast of a 0.8% gain. This was the fifth straight quarter of growth at 0.7 percent or more. The annual pace reached 3.5%, fueled by robust population growth of 2.1%. Manufacturing grew 1.2% in the quarter and tourism exports and retail trade and accommodation services were boosted by a surge of tourists. The service sector, which makes up 70% of the economy, expanded 1.1% in the quarter. However, the participation rate declined slightly from 64.7% to 64.6%. Economists expect a growth rate of 0.7% in the fourth quarter of 2016.
  8. Japan rate decision: Thursday. The Bank of Japan maintained its interest rates at minus 0.1% and the 10-year government bond yield to around zero%. The Central bank raised its growth projections for the fiscal year beginning in April to 1.5% from 1.3% in the previous month due to positive expectations for exports. Projections for growth in 2018 have also increased. BOJ Governor Haruhiko Kuroda reassured reporters saying U.S. President Donald Trump’s protectionist policy will boost growth in the US and around the world. Kuroda also said the 2% inflation target may take longer to achieve.
  9. UK rate decision: Thursday, 12:00. The  Bank of England  maintained its benchmark rate at 0.25% and voted to continue its quantitative easing measures. The Central bank raised its forecasts for the UK economy, increasing the odds for a rate hike rather than a rate cut. The bank predicts the economy will grow 2% this year and the unemployment would be much lower than previously projected.   Growth has remained resilient since the Brexit vote and policymakers expect growth to continue in the coming months.
  10. US Building Permits: Thursday, 12:30. The number of building permits surged 4.6% in January to a rate of 1.29 million units, the highest level since November 2015 indicating the housing market will increase its activity in the coming months. Economists had forecast permits would remain at 1.23 million units. This positive data together with the tight labor market shows the economy continues to improve. The number of building permits is expected to reach1.26 million this time.
  11. US Philly Fed Manufacturing Index: Thursday, 12:30. Philly Fed’s manufacturing activity survey exceeded expectations registering 43.3  for February, way above economists’ expectations of  18.5, jumping higher up  from the 23.6 reading in January.  This is the highest reading for the index since 1984 and the largest gap between the reading and expectations since 1998. The current new orders index increased 12 points this month.   The exports index increased 8 points. Other broad indicators also corroborate growth. Manufacturing activity in the Philly area is expected to reach 30.2 in March.
  12. US Unemployment Claims: Thursday, 12:30. The number of Americans filing new claims for unemployment benefits increased from a 44-year low to 243,000 in the week ended March. However despite the 20,000 rise the reading still remained at a healthy labor market conditions.  Economists expected claims to reach 239,000 for the week. The four-week moving average of claims fell by 2,250 to 236,500. The positive reading shows the labor market is near full employment and is ready for another rate hike. The number of jobless claims is expected to rise to 245,000.
  13. US Prelim UoM Consumer Sentiment: Friday, 15:00. Consumer confidence declined in February to a three-month low of 95.7 from 98.5 in January, down from a 13-year high, amid milder expectations on finances and the economy. The results reflected clear differences between Republicans and Democrats following the election of Donald Trump as president. Republicans registered sentiment about 40 points higher than Democrats, according to the survey. The current conditions index inched down to 111.2 from a reading of 111.3 in the prior month.  Future expectations six months from now decreased to a three-month low of 85.7 from 90.3. Consumer moral is expected to increase to 97.1 this time.

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

*All times are GMT.

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Anat Dror

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer