Forex Weekly Outlook April 1-5: Full NFP buildup and the usual Brexit circus

Fears of a recession and Brexit continued dominating the headlines in the last week of Q1. Q2 begins with a full buildup to the Non-Farm Payrolls. Here the highlights for the next week.

The Brexit drama continued in full force as Parliament forced “indicative votes.” Fears of a recession continued amid unimpressive data from the US and from other countries.

1. Chinese Caixin Manufacturing PMI: Monday, 1:45. The world’s second-largest economy is slowing down and markets are eyeing the severity of the situation. The independent gauge for China’s manufacturing sector dropped to 48.9 in February, indicating deepening contraction. Another slide will be worrying not only for the Aussie but to the whole world.
2. Euro-zone inflation: Monday, 9:00. Euro-zone inflation is not going anywhere fast. Headline Consumer Price Index dropped from around 2%, the ECB’s target, down to 1.5% in February. Core CPI is stable at only 1%. The ECB recently took a dovish tilt and it is unlikely that the preliminary data for March will change the picture.
3. US Retail Sales: Monday, 12:30. Consumption is critical to the US economy. Back in December 2018, around Christmas, the American consumer badly disappointed and the volume of sales tumbled. The situation improved in January with retail sales rising by 0.2%, core sales by 0.9%, and the all-important Control Group by 1.1%. More moderate increases are due today.
4. US ISM Manufacturing PMI: Monday, 14:00. The first hint towards Friday’s NFP comes early in the week. The forward-looking ISM Manufacturing PMI dropped to 54.2 points in February, reflecting weaker growth. The sentiment is likely to drop once again.
5. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia did not change its interest rate since 2016 but has made a dovish shift, indicating that the bias is no longer towards raising rates. The April decision is unlikely to result in a rate cut, but deeper concern about the global economy and the local housing sector could weigh.
6. US Durable Good Orders: Tuesday, 12:30. Orders of durable goods represent investment and are watched closely by the Fed. Back in January, headline rose by 0.3%. Excluding defense, they rose by 0.7% but excluding transportation, they slipped by 0.2%. The most important core component, excluding defense and aircraft, rose by 0.8%. It may drop now, in the publication for February. The data are still lagging due to the government shutdown.
7. US ADP Non-Farm Payrolls: Wednesday, 12:15. After a few months of quick increases, America’s largest private payrolls provider reported a more modest increase in jobs: 183K. Nevertheless, it was still substantially above the gains in the official report. Apart from a significant revision, a smaller rise in positions is likely now.
8. US ISM Non-Manufacturing PMI: Wednesday, 14:00. Contrary to the manufacturing sector, the services one is doing quite well. ISM’s gauge scored 59.7 points in January, reflecting robust growth. A slide is on the cards now.
9. ECB Meeting Minutes: Thursday, 11:30. The European Central Bank went further and faster than expected in its March meeting, pushing back on raising rates to 2020 at least and announcing new funding for banks. The meeting minutes will reveal how bad the situation is in the eyes of the Frankfurt-based institution.
10. US Non-Farm Payrolls: Friday, 12:30. The US jobs report for February was a big disappointment on the headline: a meager 20K positions were added to the world’s largest economy. However, wages increased by 0.4% m/m and 3.4% y/y, impressive numbers. On one hand, the small increase in positions may be worrying. On the other, it makes sense to see fewer gains when the economy is closer to full employment.
11. Canadian jobs report Friday, 12:30. Contrary to the US, Canada continued its winning streak of employment reports in February, with an increase of no less than 55.9K jobs. The unemployment rate stood at 5.8% but with a participation rate of 65.8% in comparison to America’s 63.2%. Moreover, wage growth accelerated once again, rising to 2.25% year over year. Another blockbuster report is unlikely.

*All times are GMT

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Further reading:

• EUR/USD forecast – for everything related to the euro.
• GBP/USD forecast – Pound/dollar analysis
• USD/JPY forecast – the outlook for dollar/yen
• AUD/USD forecast – projections for the Aussie dollar.
• USD/CAD forecast – Canadian dollar predictions

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