Last week started with a bang following the unsuccessful repeal and reform of Obamacare. EURUSD rose to 1.09 on Monday, but was more than two big figures lower on Friday. That happened despite a lack of important data from the United States, but rather some unexpected help from the European Central Bank. Although the ECB feels comfortable with the ongoing recovery in the Eurozone, it doesn’t feel comfortable with the market reaction to its March meeting. Leaks from the Central Bank helped to push the euro sharply lower and the impact was reinforced by weaker inflation data from the EMU. The upcoming week could lead to a continuation of the latest trend as some crucial events, especially in the United States, are due.
US data: Non-Farm Payrolls (Friday, 1:30 pm DST), ADP (Wednesday, 1:15 pm DST), ISM manufacturing (Monday, 3:00 pm DST), ISM non-manufacturing (Wednesday, 3:00 pm DST)
The Obamacare repeal failed but the future still could be bright for the US dollar. However, that will largely depend on the strength upcoming economic data. The US Federal Reserve is leaning towards three rate hikes in 2017 conditional on a backing from the economy. The non-farm payrolls report is certainly at the top of our watchlist. The US Labour market is strong, but a modest gain in wages could argue against rapid monetary tightening. That is why a solid increase in both employment and wages could be needed for the USD to strengthen further.
FOMC minutes (Wednesday, 7:00 pm DST), ECB minutes (Wednesday, 12:30 pm DST)
As it was said earlier the Federal Reserve is still leaning towards 3 rate hikes in 2017. Such view was confirmed last week by some of the FED speakers, including vice-president Stanley Fischer. What’s more, Eric Rosengren who was seen as a dovish member, said that even 4 rate hikes could now be appropriate this year. We doubt that his view is shared by a majority within the FOMC, but it doesn’t mean that such scenario is completely out of this world. Minutes from the March meeting could provide more insight on the discussion that took place ahead of the third rate hike since 2008, thus leading to a shift in both rate hike expectations and the US dollar. The ECB minutes are worth looking at too. Although the minutes itself do not traditionally have an impact on the euro, that could certainly change this time around. The Bank has sent a mixed signal recently on its next moves, so the document could shed more light on the euro’s future.
Trump - Xi Jinping meeting: 6-7 April
Donald Trump caused a nervous reaction on the JPY and the CHN with his latest tweet in which he mentioned currency manipulators. In the upcoming week he will host his first meeting with China’s president, Xi-Jinping. According to Trump, this meeting could be quite difficult as he plans to tackle trade deficits, including the one with China. That is why outcome of the meeting could be important for global trade and for financial markets.