Forex Weekly Outlook Mar. 16-20

The dollar stormed the board, with the euro and the pound standing out as the biggest losers. The Fed decision is the key event in a week that also features rate decision in Japan and Switzerland, employment data from the UK and the US and many more. These are the major events on FX calendar. Join us as we check on the highlights of this week.

The US job market demonstrated renewed strength with a 36,000 fall in the number of jobless claims, reaching 289,000. However, retail sales disappointed, dropping 0.6% in February as harsh weather reduced sales and affected growth in the first quarter. Also consumer confidence slipped. Will the US economy shake off winter slowdown? For the US dollar it did not really matter. EUR/USD reached levels last seen over 12 years ago, with parity seeming closer and also the previously strong pound gave in. The Aussie was supported by jobs data, the kiwi by an upbeat central bank and the loonie was hit by oil. Let’s start,

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Mario Draghi Speaks: Monday, 18:45. ECB President Mario Draghi is scheduled to speak in Frankfurt. He may talk to the ECB’s new QE plan aimed to spur growth in the euro member countries by injecting 1.1 trillion euros ($1.2 trillion) into the economy. Market volatility is expected. In his previous speech, Draghi hurt the euro: he reiterated that reaching the stronger growth forecasts depends on implementation of current programs.
Japan rate decision: Tuesday. The Bank of Japan (BoJ) voted to maintain its monetary policy in its February meeting and continue implementing its plan to increase monetary base to an annual pace of JPY 80 trillion. This step will help ensure the Central Bank’s inflation target of 2.0%. The BOJ noted the economy continued its moderate recovery with a pickup in exports. Consumer spending also remained strong due to rising employment and better wages. Inflation expectations remain positive despite the decline in oil prices. Rates are expected to remain unchanged this time.
German ZEW Economic Sentiment: Tuesday, 10:00. German analyst and investor sentiment jumped in February its highest level in a year, reaching 53, following 48.4 in January boosted by the European Central Bank’s bond-buying program. However, the Greek debt problem and the Ukraine crisis weighed on the economic outlook. Economists expected a higher leap to 55. The German government forecasts growth of 1.5% in 2015. Sentiment among German analysts and investors is forecasted to improve to 58.9 in March.
US Building Permits: Tuesday, 12:30. Building Permits weakened further in January reaching 1.053 million, dropping 0.7% form the rate of 1.07 posted in December. Economists expected a rise to 1.08 million. Other housing figures were also disappointing such as a 2% decline in housing starts and low homebuilder sentiment. Housing recovery remains slow and prices outpace wage growth. The number of permits is expected to grow to1.07 million.
UK employment data: Wednesday, 9:30. Britain’s labor market continued to improve in January with a bigger than expected decline in the number of jobless applications. The number of unemployed declined by 38,600 in January after a 35,800 drop in December, indicating job creation is rising. Economists expected a smaller decline of 25,200 in January. According to the ILO measure, unemployment fell by 97,000 in the three months to December, lowering the unemployment rate to 5.7%. Another decline of 31,000 is expected in the number of jobless applications.
US rate decision: Wednesday, statement and forecasts at 18:00, press conference at 18:30. The Federal Reserve maintained their monetary policy in January, leaving the word “patience” regarding rate hikes intact. The Fed admitted that inflation weakened considerably due to the recent drop in oil prices. The members are watching for economic developments to see what happens. Job gains continue to grow and the unemployment rate has also declined closing in on its pre-recession level, however, wage growth remains subdued as companies continue to find an abundant supply of potential employees. Since then, Yellen testified in Capitol Hill and basically paved the road for removing forward guidance in this March meeting. This is now expected and could further lift the greenback. If the wording about patience remains unchanged, the dollar would plunge. It is also important to watch out for updated forecasts: they will probably show lower unemployment expectations but also lower inflation and perhaps the same growth numbers. In the press conference, reporters might try to extract more hints from Yellen regarding the rates and it will be interesting to see how she deflects the questions.
NZ GDP: Wednesday, 21:45. The New Zealand economy boosted growth in the third quarter expanding 1.0%, the strongest gain in 15 years. This impressive figure was preceded by a 0.7% expansion in the second quarter. Economists expected a growth rate of 0.7%. On a yearly base, growth remained unchanged from the second quarter reaching 3.2%. New Zealand is expected to expand by 0.8% in the fourth quarter of 2014.
Switzerland rate decision: Thursday, 8:30. The Swiss National Bank rocked markets on January, while deciding to abandon its three-year-old currency cap of 1.20 Swiss francs to the euro, sending the currency high against the euro sending stocks down. Being an export reliant, 40% of which going to the euro zone endangered many Swiss companies. To balance the Swiss franc, the SNB cut its interest rate taking it further down into negative territory of -0.75% following -0.25% in the previous month. No change in rates is expected.
US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits declined more than expected last week, reaching 289,000. The 36,000 fall offers further evidence that the labor market is strengthening. Economists expected a higher figure of 306,000. The four-week moving average fell 3,750 to 302,250 last week. The NFP report showed a 295,000 job gain in February and a 6-1/2-year low of 5.5% unemployment rate. February marked the 12th straight month that employment gains have been above 200,000, the longest such run since 1994. The number of new claims for unemployment benefits is predicted to rise to 297,000 this week.
US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing activity in the Philadelphia area fell to 5.2 in February, following 6.3 in January, while economists expected a rise to 8.8. However, despite the three months of decline, manufacturing activity still remains positive pointing to growth. The outlook showed 55% of companies were optimistic regarding future demand, while 20% reported a decline. Economists believe the Philly Fed is affected by seasonal adjustment factors in winter and in fall. Expecting a boost in the spring and summer seasons. Manufacturing activity is expected to7.3 in March.

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

*All times are GMT.

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Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer Anat's Google Profile

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