Forex Weekly Outlook March 29-April 2 – US shows strong numbers, Fed stays dovish

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The Federal Reserve reiterated its dovish stance, but the US still enjoyed a strong week, as US yields remain high.

The eurozone manufacturing sector remains a bright spot, as PMIs pointed to accelerated growth in Germany, France and the eurozone. German Manufacturing PMI stood at with a sharp reading of 66.6, up from 60.4 previously.

In the UK, wage growth improved from 4.7% to 4.8%, but unemployment claims rose unexpectedly, with a huge gain of 86.6 thousand, compared to the forecast of 9.0 thousand. Inflation also disappointed, with CPI slowing from 0.7% to 0.4%. Manufacturing and Services PMI showed an acceleration in growth.

In the US, Fed Chair Powell and Treasury Secretary Yellen testified before Congress, with the duo reiterating a dovish stance. Yellen spoke about the follow-up stimulus, which she said will be paid by higher taxes. Powell acknowledged that inflation would likely increase but that it would be temporary, and that the Fed would not raise interest rates. US GDP for Q4 of 2020 was revised upwards from 4.1% to 4.3%. As well, unemployment claims fell to 684 thousand, marking a 1-year low.

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  1. UK GDP: Wednesday, 7:00. First estimate for GDP in Q4 came in at 1.0%, but we could see a sharp loss in the second estimate, which could lead to volatility from GBP/USD.
  2. Eurozone Inflation Report: Wednesday, 10:00.  Eurozone headline inflation was unchanged in January at 0.9%. Core CPI took a dip, slowing from 1.4% to 1.1%. The estimate for February stands at 1.3% for headline CPI and 1.1% for the core reading. 
  3. German Prelim CPI: Monday, 9:00. This key inflation gauge ticked lower to 0.7% in February, down from 0.8% beforehand. The downturn is expected to continue in March, with a forecast of 0.5%.
  4. US Employment Report: Friday, 13:30.  The US releases key job numbers, which can have a strong effect on the direction of the US dollar. The street consensus is for a strong NFP report, with a forecast of 633 thousand.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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