Forex Weekly Outlook April 12-16 – Fed stays dovish, euro recovers

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The US economy continues to show signs of recovery, but the Fed squashed any expectations of tapering QE in the near future, saying that the economy required continuing support. PMIs in Europe and the UK showed improvement in March.

German and eurozone Service PMIs were a bit higher than expected, with readings of 51.5 and 49.6, respectively. For Germany, this was the first time that services showed growth in six months – the 50 line separates growth from contraction.

In the UK, March PMIs signaled strong economic growth. Services PMI improved to 56.3, up from 49.5. This was well into expansionary territory, above the 50-level. Construction PMI jumped to 61.7, up from 53.3. This showed the strongest rate of construction output growth since September 2014.
In Canada, job creation soared in March, with gains of 303.1 thousand, crushing the estimate of 101.5 thousand. The unemployment rate fell to 7.5%, down from 8.2% beforehand.
In the US, JOLTS Job Openings rose to 7.37 million, up from 6.92 million and well above the forecast of 6.91 million. However, unemployment claims climbed unexpectedly, from 719 thousand to 744 thousand, well above the estimate of 682 thousand.
The Federal minutes indicated that the central bank remains concerned about the strength of the US economy and will continue its QE program in order to support economic growth.
  1. UK GDP: Tuesday, 6:00.  Monthly GDP is projected to show a gain of 0.5% for February, after a reading of -2.9% beforehand.
  2. US Inflation Report: Tuesday, 12:30. CPI will be closely watched, but is not expected to show much change in April. Headline inflation is expected in at 0.5% and the the core reading at 0.2%.
  3. Canada ADP Non-Farm Employment Change: Thursday, 12:30.  This report has been showing sharp job losses and came in at -100.8 thousand in February. Will we see an improvement in March?
  4. Eurozone Inflation Report: Friday, 9:00. Headline inflation rose to 1.3% in February, up from 0.9% beforehand. Core CPI slipped from 1.1% to 0.9%. The upcoming releases are expected to confirm the initial releases.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.