Forex Weekly Outlook Apr. 13-17

The US dollar managed to stage a recovery after the previous blows, especially against the majors. A busy week awaits traders with US inflation and consumer data as well as rate decisions in Canada and the euro-zone among other events.  Here is an outlook on the highlights of this week.

US data began recovering and the dollar followed. The ISM Non-Manufacturing PMI  was OK and JOLTs beat expectations. But it was the meeting minutes that provided the greenback with the biggest push: they  revealed that in March, some members talked about hiking in June. Despite the known fact about the existence of hawks and the timing of the meeting before the weak NFP, the greenback soared. It probably remains the cleanest shirt in the dirty pile. Elsewhere, Greek worries weighed on the euro, elections worries hurt the pound and the yen also slid.  The Aussie stood out, enjoying yet another “no change” decision by the RBA.

1. UK  CPI: Tuesday, 8:30. Inflation in the UK reached a flat 0% in February, a figure that alarmed many. Will Britain enter deflation? This could push back any potential rate hike for even longer and also cast its shadow on the euro-zone. Official expectations stand on another 0% read y/y.
2. US Retail Sales: Tuesday, 12:30. For a third consecutive time, retail sales  squeezed and disappointed. The fall of 0.6% in February will likely be followed by a bounce in March of 1.1%. Also core  sales have followed the same pattern with a drop of 0.1% in February. Also here, a bounce is on the cards: +0.7%.
3. US PPI: Tuesday, 12:30. Producer prices serve as a warm up to consumer prices. After a drop of 0.5% in both headline and core figures in February, rises are expected in both, 0.2% and 0.1% respectively, especially as oil prices have stabilized.
4. Chinese GDP: Wednesday, 2:00. The world’s No. 2 economy has grown at a pace of 7.3% in Q4 2014 and is expected to experience slower growth in Q1. Some say it is inevitable and others say it is wisely engineered by the leadership. Growth in China closely impacts Australia but certainly has implications for the  entire world. A slide to 7% y/y is on the cards and as authorities wish to see.
5. Euro-zone rate decision:  Wednesday, decision at 11:45, press conference at 12:30. In the last meeting by the ECB in early March, Draghi showed determination in implementing the QE program announced in January.  Implementation has begun and it is going well. The Bank made it clear that success of the euro-zone in general and particularly regarding inflation depends on full implementation. Will he continue the same determination? If so, the euro would feel the weight. If optimism rises due to the recent signs of growth, we could see the common currency rise. The interest rate is expected to remain unchanged at 0.05% with a negative deposit rate of 0.20%. The latter serves as the lower bar for buying bonds in the QE program
6. Canadian rate decision: Wednesday, 14:00. The Bank of Canada left the interest rate unchanged at 0.75% and is expected to do so once again. After the surprise cut in January, Poloz and his team seemed more optimistic about the economy and hinted that this was not the beginning of a new loosening cycle. How will they sound now? Worries about Q1 growth could be echoed in the statement. Note that the release is followed by a press conference at 15:15.
7. Australian employment data: Thursday, 2:30. Australia enjoyed job growth in February: 15.6K jobs were added.  Also the unemployment rate went in the right direction and dropped to 6.3%. In the bigger scheme of things, unemployment is still on the rise and is likely to  rise later on in the year. Very similar number are expected now: a gain of 15.1K jobs and an unemployment rate of 6.3%.
8. US housing data: Thursday, 12:30. These figures went in different directions: building permits rose to a promising 1.09 million (annualized) in February, while housing starts stood on 0.90 million. The latter can be blamed on the cold winter weather, while the former is more forward looking. Building permits are expected to stand at 1.08 million (annualized) and housing starts to bounce back to 1.04 million. Note that revisions are quite common here.
9. US unemployment claims: Thursday, 12:30. The weekly gauge of jobs did bounce back from the lows but beat expectations by hitting 281K. Perhaps more importantly the moving average fell to levels last seen many years ago at 282K.  It was above 300K not too long ago. A small rise to 284K is on the cards.
10. US  Philly Fed Manufacturing Index: Thursday, 14:00. The regional figure is for the month of April,  providing a fresh insight on the manufacturing situation. 4 consecutive misses on expectations set the number on 5 points last time. A small rise is likely: 5.5 points.
11. UK employment data: Friday, 8:30. This is the last jobs report before the May elections and carries more political weight. The claimant count change, aka jobless claims, continued dropping quickly in February: 31K. A similar number is probable now – a slide of 28.5K. The unemployment rate is also going in the right direction, and stood on 5.7% in January. A drop to 5.6% is expected. This is what the current  conservative coalition government is championing. However, the average earnings index has risen by only 1.8% y/y in January, and this provides fuel  for the opposition Labour. A tick down to 1.7% is expected now.
12. US CPI: Friday, 12:30.  When looking at the headline number, the US is experiencing deflation, but this is clearly oil-related. Year over year core inflation is actually on the rise, reaching 1.7% in February. Both monthly indicators rose 0.2% last time and could follow suit this time, with +0.3% in the headline number and +0.2% in the core figure.
13. US Consumer Confidence: Friday, 14:00. The Reuters / University of Michigan consumer confidence survey edged up to 93 points in the final read for March. We now get  the preliminary figure for April and a higher score is expected: 93.8 points.

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

*All times are GMT.

In this  week’s podcast, we  discuss:  USDown or greenback comeback? And also touch other topics:

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Further reading:

• For EUR/USD, check out the  Euro to Dollar forecast.
• For the Japanese yen, read the  USD/JPY forecast.
• For GBP/USD (cable), look into the  British Pound forecast.
• For the Australian dollar (Aussie), check out the  AUD to USD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar
• For the Swiss Franc, see the  USD/CHF forecast.