The Forex Week Ahead

The Forex Week Ahead April 03rd -07th

USD It has been a somewhat tedious couple of weeks for US market participants since the Federal Reserve’s policy meeting and decisions on March 15th and the failed attempt to pass the American Healthcare Act on March 24th. The absence of any truly new information since then has had Fed officials repeating much of what they’ve previously guided and Q1 growth readings turning weaker. Next week could heat things up a bit with the potential for materially new information. Most of the macro risk lands late in the week. Notable political headline event risk comes with the meeting between Presidents Xi and Trump. Friday’s nonfarm payrolls report for March lands in the middle of it all. Consensus expects a marked slowing of job growth to the 175k pace which would be the first sub-200k print of the year. Of course, that has been the expectation previously. As usual, wages will also be watched after nominal wage growth climbed to 2.8% y/y in February and just shy of the 2.9% mark set in December that had been the quickest pace of wage gains since mid-2009. In inflation adjusted terms, however, real wages are growing at a tepid pace. ISM manufacturing is on tap for a March update on Monday, ISM has been taking off since Fall. ISM exaggerates swings in actual manufacturing production but it has generally captured the recent increases. This recovery began well before the US election as markets and the economy rebounded from the challenges that reached a peak in early 2016. Fed communications over the course of the week risk being stale in the face of new tracking data and policy developments. Minutes to the March 15th FOMC meeting arrive on Wednesday.

EUR Tracking the strength of the Eurozone economy’s growth rate in Q1 will be the prime focus next week. The issue is whether GDP growth is reflecting sharp improvements in sentiment gauges like purchasing managers’ indices—or if sentiment is not translating into activity. Consensus presently leans toward the latter argument. Germany, France and Spain will release industrial production. Germany also updates factory orders. Italian and the Eurozone add-up for retail sales round out the updates. Consensus presently estimates growth of 0.4% q/q non-annualized for the whole Eurozone which would match the growth rate over each of the prior two quarters despite improving sentiment readings and so next week’s figures will further inform this bias.

GBP UK Purchasing managers’ indices for various sectors covering the month of March lag the Eurozone’s readings so it remains to be seen if similar upsides will arise in the UK when they are updated, especially after the UK’s composite PMI fell back in February unlike the Eurozone. Trade and industrial production will be the only hard activity readings to inform an in-quarter forecast tracking bias.

JPY Japan’s first quarter Tankan report on manufacturing and non-manufacturing conditions, Japanese vehicle sales are the principle releases in a quiet data week in Japan

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