The US dollar retreated for a second week in a row, and ended lower even against the Japanese yen. Will this trend continue? German ZEW Economic Sentiment, US housing and inflation data, Mario Draghi’s speech and US unemployment claims are the major events this week. Here is an outlook on the main market-movers this week.
Last week, US jobless claims fell back down all the way to 346K, after an alarming rise of 388K in the preceding week. However, retail sales were a big disappointment with purchases down 0.4% in March following a 1.1% climb in February, the biggest setback since June. Will the US economy continue to improve in the coming months? EUR/USD continued enjoying the relative calm in Europe and more importantly the lack of monetary easing that is seen in Japan and the US. Let’s Start
- German ZEW Economic Sentiment: Tuesday, 10:00. German investor sentiment advanced in March to 48.5 from 48.2 in February, providing another sign that Europe’s largest economy rebounded in the first quarter. However the ZEW showed a rising concern from a worsening of the EU debt crisis. Yet the reading was higher than the 47.9 predicted. A sharp drop to 41.6 is forecast. The IFO index dropped last time.
- US Building Permits: Tuesday, 13:30. The number of building permits issued in February surged to a five-year high of 946K following 923K in the previous month, supporting the U.S. economic expansion. Building permits were evenly split between single and multi-family units. A small drop to 940K is expected now. The hosing sector has been steady recently.
- US inflation data: Tuesday, 13:30. US Consumer Price Index rose 0.7%, amid a sharp increase in gasoline prices. However excluding volatile figures, inflation remained modest, rising 0.2%, in line with market expectations. This reading was followed by a 0.3% increase in January. CPI is expected to remain flat, while Core CPI is predicted to rise 0.2%.
- Mario Draghi speaks: Tuesday, 14:00. ECB President Mario Draghi will speak in Strasbourg about the ECB’s activities at the European Parliament. His words may cause volatility in the market. Draghi could provide some hints about the next monetary policy decision. He whipsawed EUR/USD in the last rate decision press conference.
- UK Claimant Count Change: Wednesday, 9:30. The number of Britons claiming unemployment benefit dropped again in February by 1,500 claims to a 20-month low of 1.542 million. However the worrying thing is how weak earnings growth is, falling to only 1.2 % year on year and the low output indicating contraction in the first quarter. No change is expected now.
- Canadian rate decision: Wednesday 15:00. The Bank of Canada left its overnight rate at 1.0%, sounding less concerned about households’ debt. The bank’s governing council suggested the current rate will remain in place longer than it had previously expected. Furthermore the BOC expects Canada’s economy to advance by 2.0% this year and 2.7% in 2014. This forecast is brighter than analysts’ predictions. The interest rate is expected to remain 1.0%. Here’s more about the Canadian economy.
- US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits dropped sharply last week to a seasonally adjusted 346,000 from 388,000 in the previous week, suggesting the last four increases were a temporary setback in the US job market. Economists believe that economic growth accelerated in the first quarter to an annual rate of 3%, a major improvement from the last quarter of 2012. A slight increase to 347,000 is expected now.
- Philly Fed Manufacturing Index: Thursday, 15:00. Manufacturing in the Philadelphia region unexpectedly surged in March to 2 from minus 12.5 February, amid a rise in orders and factory employment. Economists expected a negative reading of -3. The Philadelphia Fed’s new orders measure climbed to 0.5 from minus 7.8 in February, while shipments rose to 3.5 from 2.4. A further improvement to 3.1 is forecast now.
*All times are GMT.
That’s it for the major events this week. Stay tuned for coverage on specific currencies
- 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