Week Ahead: US economic data and European risk to guide markets

US Employment Data and Fed Minutes

The U.S. dollar is mixed as it gained against the euro, Swiss franc, New Zealand dollar and Japanese yen, but lost ground against the CAD, GBP and AUD. Political risk continues to impact markets as U.S. uncertainty, the official triggering of Brexit and the upcoming French elections make investors anxious even as energy markets rebound thanks to a possible extension to the Organization of the Petroleum Exporting Countries (OPEC) production cut deal. On the diplomatic front, Chinese President Xi Jinping will visit the United States and is scheduled to meet U.S. President Donald Trump for the first in-person meeting on April 6–7.

Following a week with scarce data, the first week of April will feature the Reserve Bank of Australia (RBA) rate decision on Tuesday, April 4 at 12:30 am EDT and the releases of the meeting minutes from the March meetings from the US Federal Reserve on Wednesday, April 5 at 2:00 pm EDT and the European Central Bank (ECB) on Thursday, April 6 at 7:30 am EDT. US data will grab the spotlight as manufacturing and non-manufacturing PMIs, crude inventories and jobs data are released.

U.S. employment data will be released this week with the ADP private payrolls leading the charge on Wednesday, April 5 at 8:15 am EDT (12:15 pm GMT). After a strong reading last month of 298,000 forecasters are expecting the number of jobs to slow down, but to remain above 200,000. The US non farm payrolls (NFP) to be published on Friday, April 7 at 8:30 am (12:30 pm GMT) is expected add 180,000 jobs to the U.S. economy keeping the unemployment rate at 4.7% with a slight rise in wages of 0.2 percent. The jobs component has been validating the decision of the Fed to move rates higher, but as inflation becomes central to the conversation the wage growth indicator will be key on Jobs Friday.

The euro/U.S. dollar (EUR/USD) currency pair lost 1.018 in the last five trading days. The single currency is trading at 1.0697 after the USD has recovered from political shocks as the Trump administration is reassessing its strategy to push pro-growth policies into other branches of the government. The partisan divide in the United States will continue to restrain any forward momentum resulting from positive economic indicators. The euro has gained from U.S. uncertainty, but has lost ground as US fundamentals remain strong and Fed speakers continue to fan the flames of further rate hikes in 2017.

Germany continues to be the engine of the EU and strong retail sales (1.8 percent) beat the estimate but inflation in the Union was lower than the estimate at 1.5 percent which puts less pressure on the European Central Bank (ECB) as it has put itself in a position where it might still have a QE program while needing to hike rates if inflation keeps climbing rapidly.

Next week will be more US focused as employment indicators will be releases as well as the meeting notes from the March Federal Open Market Committee (FOMC) which resulted in a 25 basis points interest rate hike. The U.S. non farm payrolls (NFP) report is the biggest economic release and could end up helping the dollar get out of the current funk due to political stagnation.

 

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