Forex Major Currencies Outlook (Apr 6 – Apr 10)

USD 

ISM March manufacturing PMI came in at 49.1 vs 45 as expected. The main drop was seen in new orders category followed by new export orders and employment. The reading beat the expectations thanks to the jump in supplier deliveries category which indicates potential supply problems in the future. February trade balance came in at -$39.9bn from -$45.3bn. Exports were down -0.4% while imports showed a bigger decline of -2.5%. The deficit with China decreased by $4bn to $19.7bn due to both falling exports and imports. Initial jobless claims for the week of March 28 came in at 6648k vs 3700k as expected. The number doubled expectations and previous week’s record reading of 3370k. That is 10 million people applying for unemployment compensation in just two weeks. Coronavirus is wrecking chaos in the labour markets. 

A record run of 113 months of jobs growth ended today with nonfarm payroll number coming in 7 times worse than expected at -701k. The unemployment rate jumped to 4.4% from 3.5% the previous month and participation rate slipped to 62.7% from 63.4% the previous month. U6 underemployment jumped to 8.7% from 7% the previous month. On the positive side, average hourly earnings came in at 0.4% m/m and 3.1% y/y both up from the previous month’s readings. The report encompasses data up to March 12 which was before the majority of jobs were lost, so April’s reading has a potential to be even worse. 

President Trump suggested that the US should continue its social distancing policies until at least April 30 instead until Easter as previously planned. Fed announced that they will temporarily ease capital requirements for big bangs. The temporary change would exclude US Treasury securities and deposits at Federal Reserve Banks from the calculation of the leverage ratio, and will be in effect until March 31, 2021. The vote to ease the requirement was unanimous. 

This week we will have rapidly climbing initial jobless claims and inflation data. 

Important news for USD: 

Thursday:

• Initial Jobless Claims

Friday:

• CPI 

EUR 

Sentiment in the EU in March showed a decline as was expected. Economic sentiment plunged below 100 to 94.5, matching the low levels from August 2013. Preliminary CPI for March came in at 0.7% y/y vs 0.8% y/y as expected dropping from 1.2% y/y the previous month due to fall in oil prices. Core CPI came in at 1% y/y vs 1.1% y/y as expected and also down from 1.2% y/y the previous month which poses greater reason for concern. Final manufacturing PMI came in at 44.5 vs 44.8 preliminary on the back of falling German reading. New orders, output and purchasing all fell while supplier deliveries index held the reading high. Final services came in at 26.4 vs 28.4 preliminary which dragged composite to 29.7 vs 31.4 preliminary. Record low readings for EU, Germany and France which will seriously damage GDP readings. February retail sales came in at 0.9% m/m vs 0.7% m/m as expected. 

Talks about coronabonds are ongoing. The southern states including France have been pushing for a collective bonds while northern countries, Germany and Netherlands, are vehemently opposed to it. The decision has to be unanimously made. Introduction of coronabonds will ease the pressure on southern countries due to the countries with strong credit rating, namely Germany, lowering the rate. 

GBP 

Final Q4 GDP came in flat and 1.1% y/y as preliminary reported. There were some changes in the details of the report, with government spending dropping and business investment rising, but the reading is still very weak and it reflects the economy that was not impacted by the virus stoppage. Final manufacturing PMI for March came in at 47.8 vs 48 preliminary while services came in at 34.5 vs 35.7 preliminary dragging down composite to 36 from 37.1 preliminary. 

This week we will have GDP, industrial, construction and trade balance data. 

Important news for GBP: 

Thursday:

• GDP
• Manufacturing Production
• Industrial Production
• Construction Output
• Trade Balance 

AUD 

Retail sales from February came in at 0.5% m/m vs 0.4% m/m as expected and rebound from -0.3% m/m the previous month. The rebound can be attributed to panic buying caused by the virus outbreak. March numbers should post the same picture. 

Official PMI data from China for the month of March showed a big rebound, a V shaped one. Manufacturing came in back in expansion at 52, services followed the suit with 52.3 while composite came in at 53. Output, new orders and employment categories all bounced back to expansion territory. Many analysts are questioning the validity of report, however due to the abysmal numbers from the previous month and the fact that PMI is measured comparing to previous month many surveyees might have set the bar too low, therefore any signs of improvement have been warmly welcomed. Caixin manufacturing PMI also went into expansion territory coming in at 51 with services also jumping to 43 from 26.5 the previous month and combining for 46.7 in composite reading. 

This week we will have trade balance data and RBA rate decision that is expected to be non-event due to the recent moves made by RBA. They need to give more time so that their measures start producing effects. Inflation data from China will be published. 

Important news for AUD: 

Tuesday:

• Trade Balance
• RBA Interest Rate Decision
• RBA Rate Statement

Friday:

• CPI (China) 

NZD 

Activity numbers in March paint a very dark picture. Business confidence plummeted to -63.5 while activity outlook plunged to -26.7. According to the report the second part of the month was particularly troublesome indicating that next month’s readings will be even weaker. Report also states that a net 23% of firms intend on laying off staff, including a net 35% of retailers. 

This week we will have bi-monthly dairy price auction. 

Important news for NZD: 

Tuesday:

• GDT Price Index 

CAD 

February trade balance came in at -CAD0.98bn vs -CAD2.3bn as expected. Exports were up 0.5% because of higher exports of aircraft, while imports were down 0.8% mostly due to a decrease in crude oil imports. This data had little to no impact as it was pre-virus news and currently everything revolves around virus related news. 

This week we will have housing and employment data. 

Important news for CAD: 

Wednesday:

• Housing Starts
• Building Permits

Thursday:

• Employment Change
• Unemployment Rate 

JPY 

The great number of data from Japan started with the unemployment rate for February which stayed at 2.4%. It continued with retail sales beating expectations coming in at 0.6% m/m and finally preliminary February industrial production came in at 0.4% m/m vs flat as expected and -4.7% y/y. Figures seem encouraging but a rude awakening and sharp drops are expected in March. Final manufacturing PMI plunged even deeper to 44.8 from 47.8 the previous month while services PMI came in at 33.8 a bit better from the preliminary reading pushing composite to 36.2. 

This week we will have spending, earnings and core machinery data. 

Important news for JPY: 

Tuesday:

• Household Spending
• Labour Cash Earnings

Wednesday:

• Core Machinery Orders 

CHF 

SNB total sight deposits for the week ending 27 March jumped to CHF620.5bn from CHF608.8bn the previous week indicating bank’s increased activity in the financial markets. The activity is aimed towards fighting the strong CHF. February retail sales bounced back into positive with 0.3% m/m. CPI in March came in at -0.5% y/y as expected while core CPI dived into negative territory with -0.1% y/y indicating deflation. 

This week we will have employment data. 

Important news for CHF: 

Wednesday:

• Unemployment Rate

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_{Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}