FX Week Ahead: US Payrolls and RBA meeting

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The markets are looking towards new trading week, marking the start of the second quarter. The economic calendar is looking busy, at least where the USD is concerned. With Monday being the Easter bank holiday, the European markets are expected to remain shut. US Payrolls and RBA meeting are up.

Data from the U.S. will start with the ISM’s manufacturing report followed later in the week by the ADP private payrolls and Friday’s nonfarm payrolls report for the month of February. The U.S. unemployment rate is once again forecast to drop to RBA 4.0%.

Elsewhere, the RBA will be holding its monetary policy meeting this week. No changes are expected from the central bank at this week’s meeting. Data from the Eurozone mid-week will see the release of flash inflation estimates. Headline inflation is forecast to rise strongly for the month of March, but most of the price gains are likely to be due to the seasonal effects.

Here’s a quick recap of the key economic events due this week.

Busy start for the USD: ISM, ADP and nonfarm payrolls

The week ahead starts off on a busy note for the U.S. dollar. Monday will see the release of the ISM’s manufacturing index. Economists forecast that manufacturing activity might have slipped modestly to 60.0 in March slightly below 60.8 in February. Despite the decline in the index, manufacturing activity continues to remain near all time highs.

Later in the week, the ADP private payrolls data will be coming out and the report could potentially set the stage for Friday’s nonfarm payrolls report. Estimates for March show that the U.S. economy might have added 195k jobs during the month of March. This marks a slower pace of job gains during the month compared to February’s strong report.

The U.S. unemployment rate is expected to decline to 4.0% from the current 4.1% for the month of March. Wage growth is also expected to show a modest gain, rising 0.2% on a month over month basis. With the data for February showing that a significant amount of slack still remains in the economy, the data for March will see investors focusing more on the page of wage growth rather than the unemployment rate.

Eurozone flash inflation estimates forecast to rise in March

The flash inflation estimates from the Eurozone will be released mid-week. Economists are forecasting that consumer prices in the Eurozone increased strongly in the month of March.

Headline consumer prices are expected to rise 1.4% on the year ending March 2018. This marks a strong increase compared to the previous month’s inflation data. Core consumer prices are also forecast to rise modestly to 1.2% on the year for March.

The gains in consumer prices are however likely to be a seasonal effect considering that higher airfares and travel during the month of March often tends to push consumer prices higher especially during the Easter weekend. While the data could offer some short term boost for the euro, ECB officials are likely to wait and watch for signs of underlying price pressures.

RBA expected to keep rates steady

The Reserve Bank of Australia will start the new month with the monetary policy meeting this week. The central bank is expected to keep the interest rates unchanged at 1.50%. This would mark nearly 20 consecutive months that the RBA held rates unchanged.

The central bank is also expected to give a neutral statement. Business confidence in the region has been strong alongside a pick up in the labor market. However risks still remain on the consumer side with spending staying low on account of weaker wage growth and a modest pace of inflation growth.

Market watches currently speculate that the RBA is likely to hike rates only around the first half of next year.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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