The US dollar had another roaring week, climbing higher against most currencies as US data shows stronger growth. Will the new forex dynamics continue? The Federal Budget Balance, US retail sales, Unemployment Claims and Consumer Sentiment are the main market movers. Here is our weekly outlook covering all major events for the coming week.
The US gained 236K jobs in February, well above market predictions. The welcome job gain pushed the unemployment rate to a four year-low of 7.7%. Additional positive figures such as the ADP report and the ISM numbers are also showing the US economy is on the right track. In Europe, Draghi managed to present lower growth forecasts and a discussion about a rate, but remained optimistic, providing support for the euro. With all this optimism, the yen continued falling, breaking 95 and not stopping there. Optimism is clearly missing in the UK, as sterling broke lower. Will these trends continue? Let’s Start
- US Federal Budget Balance: Tuesday, 18:00. US federal government reported saw an unusual surplus of $2.9 billion in January, following a $1.2 billion deficit in the previous month. Analysts expected deficit to reach $4.6 billion. During the first four months of the 2013 budget year the deficit has grown $290.4 billion. That’s nearly $60 billion lower than the same period a year ago. The Congressional Budget Office predicts that the deficit will reach $845 billion on Sept. 30, posting the best reading since 2008. A deficit of $220 billion is expected this time.
- US Retail sales: Wednesday, 12:30. The pace of spending weakened in January following the expiry of reduced payroll taxes. Retail sales registered a mild gain of 0.1% following a strong reading of 0.5%. The rise was in line with market expectations. Meanwhile Ex-auto sales in January gained 0.2% after increasing 0.3% in December. Retail sales is expected to gain 0.5%, while Core sales are predicted to climb 0.2%. A stronger consumer confidence figure supports positive retail sales.
- NZ rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand maintained its policy overnight cash rate (OCR) at 2.5%, in line with predictions. The RBNZ remarked that an improvement among NZ’s trading partners, noting that global growth is expected to recover in 2013, also affecting domestic growth. Inflation is subdued and is currently below the floor of the RBNZ’s inflation target range of from 1% to 3%. However the job market remains slow. No change in rates is expected. NZD/USD is on the back foot.
- Australian Employment data: Thursday, 0:30. Australia’s unemployment rate remained steady at 5.4% in January contrary to predictions for a rise to 5.5%. Meanwhile the number of people employed increased by 10,400 to 11,549,100 in the month, however the rise was driven by part-time employment. Unemployment rate is expected to rise to 5.5% with a 10,700 job addition. The RBA left the rates unchanged and allowed the Aussie to escape the lows.
- Swiss rate decision: Thursday, 8:30. The Central Bank decided to leave the three-month Libor target rate at the historically-low range of 0% to 0.25% in December, with accordance to market predictions. The Swiss National Bank (SNB) also noted its commitment to maintain the CHF 1.20 per EUR cap established in September 2011, by buying foreign currency “in unlimited quantities” in order to enforce the minimum exchange rate. Inflation in 2012 matched the Bank’s forecasts. Rates are expected to remain unchanged.
- US PPI: Thursday, 12:30. The headline PPI increased in January by 0.2%, little below the 0.3% gain expected by analysts, following a 0.2% drop in December. A decline in energy prices offset the strong rise in food price. Meantime, core PPI excluding food and energy gained 0.2%, after increasing 0.1% in December. An a rise of 0.6% is expected.
- US Unemployment Claims: Thursday, 12:30. The number of Americans seeking unemployment aid declined to a seasonally adjusted 340,000 last week, leading the four-week average to its lowest level in five years. The reading was 7,000 lower than in the prior week in contrast to predictions for a rise to 354,000. This is another good sign for the US economy. A small rise to 355,000 is forecast now.
- US inflation data: Friday, 12:30. The consumer price index for January remained unchanged as in December, lower than the 0.1% gain predicted by analysts. Meanwhile the core CPI-excluding food and energy rose sharply by 0.3% after an increase of 0.1% in December. Analysts projected a 0.2% gain. Another 0.2% rise is expected.
- US UoM Consumer Sentiment: Friday, 12:55. US consumer confidence rose in February to a three-month high of 76.3, following 71.3 registered in December. Analysts expected a lower reading of 74.8.The rise occurred amid a substantial improvement in market conditions and home prices spurring consumer confidence and consumer spending. A further improvement to 78.2 is expected 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