Forex Weekly Outlook March 20-24

The US dollar was on the back foot due to the Fed’s “dovish hike”. Will the downfall continue? UK inflation data, Yellen’s speech and Durable goods orders are the major events on forex calendar. Join us as we explore the market movers for this week.

Tthe Federal Reserve raised its benchmark interest rate by 0.25 percentage point to 1.0%. This was the third time that the Fed has increased rates since the financial crisis. The change was widely expected following the strong jobs report in February and Yellen’s comments that a rate hike was on the table. However, the Fed did not alter its outlook and the dollar collapsed. Here are the 5 dollar downers in the decision. In the Netherlands, the extreme-right failed to  come on top, assisting the euro, while the hawkish tilt by the BOE boosted the British pound. Let’s start:

1. UK inflation data: Tuesday, 9:30. British consumer prices climbed in January at the fastest pace since June 2014, due to higher global oil prices and a weaker  sterling,  Consumer prices edged up 1.8% compared with a year earlier, slightly below forecasts for a 1.9% annual increase. UK’s central bank expects that inflation will rise above 2.7% in a year’s time amid higher import prices induced by the Brexit decision to leave the European Union. UK CPI is expected to rise further to 2.1% this time.
2. US Crude Oil Inventories: Wednesday, 14:30. Crude stocks declined modestly last week after nine weeks of increases, showing a draw of 237,000 barrels. Oil prices were little changed as the weaker dollar was offset by a high level of U.S. inventories. Although market focus remains fixed on U.S. production growth and elevated domestic inventory levels, it does not apply to other parts of the world. For example, Asia remains in a deficit, while regions like the Atlantic Basin and the U.S. remain in surplus.
3. New Zealand rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand maintained its Official Cash Rate unchanged at 1.75% in February. Despite a continued improvement in commodity prices as well as business activity and a brighter global outlook, major challenges such an on-going surplus capacity in the global economy and rising geo-political uncertainty, continue to trouble policymakers.
4. US Unemployment Claims: Thursday, 12:30. The number of Americans filing new claims for unemployment benefits declined to a seasonally adjusted 241,000 in the week ended March 11. The decline was bigger than the 245,000 anticipated by analysts. Jobless claims have remained below 300,000 for 106 consecutive weeks. Meanwhile, the four-week moving average of initial claims rose by 750 last week to 237,250. The US employment market shows continuous resilience since the start of 2017 with unemployment down at 4.7% and a healthy jobs gain of 235,000 in February. Wages rose 2.8% in February indicating further firming in the labor market. The number of new claims is expected to be 240,000 this week.
5. Janet Yellen speaks: Thursday, 13:45. Federal Reserve Chair Janet Yellen will speak in in Washington DC. In a recent speech made by Yellen after the Fed’s rate hike on March 15, she said It’s finally safe to “feel good” about the U.S. economy. Policymakers are confident that the economy is resilient to shocks and the rate increase is their vote of confidence as both present as well as future conditions look upbeat.
6. US Durable Goods Orders: Friday, 12:30. Orders for U.S. durable goods rebounded in January, rising 1.8% after two months of declines, showing companies remained upbeat at the start of the year. However a key factor that tracks business investment plans slipped 0.4%. Excluding the transportation, orders fell 0.2%, the weakest reading since June. However, analysts expect business investment will strengthen this year amid a bright recovery in the manufacturing sector. Orders for long lasting products are expected to gain .1%, while core orders are estimated to rise by 0.5% in February.

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

*All times are GMT.

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