Forex Weekly Outlook April 1-5

The US dollar advanced against most currencies towards the Easter holiday. As a new month and quarter begin, the calendar is packed: rate decisions in Australia, Japan, the UK and the Eurozone and alongside top tier US figures that build up towards the Non-Farm Payrolls are scheduled this week. Here is an outlook on the major market-movers awaiting us.

The crisis in Cyprus dominated the news and hit the euro badly. The crisis is far from over. While banks in the island nation finally reopened, a lot of confidence was lost in the euro-zone, which also suffers from a political crisis in Italy and signs of weakness in Germany. Weaker than expected US data was released, with the final read of GDP for the fourth quarter of 2012 revised to a 0.4% expansion instead of the 0.5% forecast. Jobless claims increased by 16,000 to 357,000 last week, pushing the 4 week average to 343,000. Nevertheless the despite the minor disappointment, the readings still project a positive trend. Will the US economy accelerate growth in the coming months?  Let’s Start

1. US ISM Manufacturing PMI: Monday, 14:00. The ISM’s manufacturing report edged up 1.1 points to 54.2, in February beating market predictions for a 52.7 reading, amid a boost in new orders. However the report also showed 1.4 points weaker employment growth, which will probably increase in light of the recent new orders. The same reading of 54.2 is expected this time.
2. Australian rate decision: Tuesday, 3:30. Australia’s central bank maintained its cash rate at a record low of 3.0%, in line with market expectations. RBA governor Glenn Stevens said further rate cuts will not be made until the impact of the recent cuts are fully felt. He also mentioned there is an improvement in financial markets of China and the United States but did he close the door to further action. No change in rates is forecast, especially after the excellent Australian jobs report.
3. US ADP Non-Farm Employment Change: Wednesday, 12:15. The ADP National Employment report revealed that U.S. companies added 198,000 workers in February, above the 172,000 increase predicted by analysts, and following 215,000 gain in the previous month, signaling a further improvement in the US labor market.  A further increase of 203,000 is anticipated.
4. US ISM Non-Manufacturing PMI: Wednesday, 14:00. The U.S. non-manufacturing sector (services) advanced better than expected in February rising to a twelve month high of 56.0 from 55.2 in January. The major factor for this rise was growing optimism about the trend of the economy and overall business conditions. A slight decline to 55.9 is expected this time.
5. Japan rate decision: Thursday. On the 7th  of March, the  Bank of Japan  kept its monetary policy intact, leaving the benchmark rates between 0%-0.10%. Masaaki Shirakawa, the outgoing governor of the BOJ, overruled suggestions for more drastic easing measures.  However, the Bank of Japan upgraded its assessment of the country’s economy. And now, the new governor Kuroda takes the helm. Expectations for more aggressive monetary easing are very high, but Kuroda may take a two step approach and might disappoint at first. Here is why.
6. UK rate decision: Thursday, 11:00. Bank of England policymakers chose to maintain interest rates at 0.5% refusing to inject further monetary easing to the UK economy, leaving asset purchase total at £375 billion, despite predictions for a £25 billion increase. Britain’s economy is on the verge of its third recession in four years, despite recent services sector data suggesting a possible improvement. No change is forecast.
7. Eurozone rate decision: Thursday, 11:45, press conference at 12:30.  The ECB will likely keep interest rates unchanged once again, even though some members wanted a rate cut back in March. The economic situation is getting worse in the euro-zone, and the crisis in Cyprus looms over the banks. These issues could change the tone, but not the rate. Mario Draghi will probably express less confidence than in March, when he boosted the euro. New measures to stabilize the banks are more likely than a rate cut at this point. Real interest rates are still low. An unexpected rate cut would send the euro tumbling down.
8. US Unemployment Claims: Thursday, 12:30. The number of Americans seeking unemployment benefits soared by 16,000 claims last week to 357,000, rising the second straight week. However layoffs remain low, supporting the recovery trend in the US job market. Economists expected a small improvement to 340,000. The four-week average, rose 2,250 to 343,000, indicating a positive trend. A small drop to 354,000 is predicted now.
9. Ben Bernanke speaks: Thursday, 14:30. Federal Reserve Chairman Ben Bernanke will  speak at the Redefining Investment Strategy Education Conference in Dayton, via satellite. His words usually causes volatility in the market. He recently said that many people are not counted as unemployed.
10. Canadian employment data: Friday, 12:30. Canada’s job market rebounded with an unexpected addition of 50,700 jobs in February, most of which were full-time positions, far more than the 8,000 gain forecasted by analyst and following a 21,900 contraction in January. However despite the increase, the Canadian unemployment rate remained stubbornly fixed at 7.0% since the number of active job seekers increased which is a good indicator for the Canadian economy. Another 7,600 jobs are expected to form, while unemployment rate is predicted to remain at 7.0%.
11. US Non-Farm Employment Change: Friday, 12:30. U.S. employment improved in February with a sharp job addition of 236,000, pushing the unemployment rate to a four year-low of 7.7%. Economists expected a more modest rise of 162,000 jobs and an unchanged unemployment rate of 7.9%. These strong figures suggest the US job market is on a positive growth trend, yet too slow for the Fed, since more than half of that decline was because of a drop in the labor force participation rate. US economy is expected to add 201,000 positions, while the unemployment rate is expected to remain 7.7%.
12. US Trade Balance: Friday, 12:30. The U.S.  trade deficit  widened in January to $44.4 billion, an increase of 16.5% from December. The reading was worse than the $42.8 deficit predicted by analysts. The increase was driven by a big jump in  oil imports and a drop in exports. Nevertheless, economists believe deficit will narrow slightly in 2013, in part because of continued gains in U.S. energy exports. U.S.  trade deficit   is expected to reach $44.6 billion.

*All times are GMT.

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

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