Forex Weekly Outlook March 17-21

The yen is the winner of a turbulent trading week which saw new highs for the euro and the kiwi. The first rate decision by Janet Yellen is the main event. Among other highlights are the German Economic Sentiment, speeches by heads of central banks, UK employment data, as well as US employment and housing data. These are the main market movers on Forex calendar. Here is an outlook on the influential events for the coming week.

US data was mixed: retail sales advanced nicely,rising 0.3%, in February but this came on top of downwards revisions. Furthermore, US jobless claims edged down by 9,000 to 315,000, its best reading since November 2013, However, consumer confidence dropped. EUR/USD climbed to new 2+ year highs, and was only temporarily hit by a comment from Draghi. NZD/USD reached new highs on a hawkish RBNZ statement that accompanied the rate hike andAUD/USD managed to focus on local job strength while escaping worries about China. Action will probably continue. Let’s start,

Updates:

• Mar 17, 10:36: Crimean Referendum threatens Europe’s Economic Balance: Sterling continued to lose ground against most currency pairs last week following the domestic account deficit data and concern regarding...

1. German ZEW Economic Sentiment: Tuesday, 10:00. German economic climate dropped more than expected in February, reaching 55.7 from 61.7 in the previous month, thanks to emerging market concerns. This release marked the second consecutive fall; economists expected a small decline to 61.3. Nevertheless, analysts expect Germany to continue its growth trend this year leading its Eurozone members to recovery. German economic climate is forecasted to decline further to 52.3.
2. US Building Permits: Tuesday, 12:30. Building permits plunged in January to 937,000, falling 5.4% from December. The release was considerably weaker than the 980,000 expected by analysts. The unusually cold weather and snow storms stopped growth in the housing sector. On an annual basis, starts fell 2.0% from January 2013, to 898,000, the lowest level since August 2011, while building permits, were up 2.4% from a year ago. A stronger reading of 970,000 is expected this time.
3. US inflation data: Tuesday, 12:30. U.S. consumer prices increased in January, thanks to a rise in demand for electricity and heating fuel, caused by the cold winter. Consumer Price Index climbed 0.1%, following a 0.3% in December. In the 12 months to January, consumer prices edged up 1.6% after increasing 1.5% in December. Meanwhile, core CPI, excluding volatile energy and food components, also rose 0.1% for a second consecutive month. In the 12 months to January, core CPI rose 1.6%, following a 1.7% increase in December. Both CPI and core CPI are expected to gain 0.1%.
4. UK employment data: Wednesday, 9:30. The British unemployment rate unexpectedly climbedin the fourth quarter, reaching 7.2% from 7.1% in the third quarter a fact that compelled the BOE to keep interest rates unchanged. Meantime, jobless claims fell 27,600 in January, beating economists forecast of 18,300. However the pace of decline will moderate in the coming months due to a certain decline in economic activity. For as long as unemployment remains above the 7% threshold, monetary policy will not be changed. Jobless claims are expected to decline by 23,300 while unemployment rate is expected to remain unchanged at 7.2%.
5. Fed decision: Wednesday, 18:00, press conference at 18:30. The taper train is on track and the Fed is very likely to reduce its bond buys by another $10 billion. After the Fed prepared markets for the tapering during a long period of time, only a major disaster could change the course. The recent OK NFP left little doubts. In addition, the composition of the FOMC is more hawkish, and Yellen would need to prove she is tough enough. It is her first decision and being a woman probably also plays a role. In the press conference, she is expected to show continuity, following in the footsteps of Bernanke, and in line with her recent lengthy testimonies in Washington. The move is largely priced in, and a strengthening of the dollar in the aftermath of the decision could be quite limited.
6. NZ GDP: Wednesday, 12:45. New Zealand economy expanded more than expected in the third quarter, rising 1.4% following a revised 0.3% increase in the preceding quarter. The main contributors were agriculture and the dairy sector. The strong growth and rising inflation prompted the RBNZ to raise rates in March to 2.75% making New Zealand the first major developed economy to tighten in the current cycle. New Zealand economy is expected to expand by 1.0% this time,1%
7. Haruhiko Kuroda speaks: Thursday, 7:15. BOE Governor Haruhiko Kuroda will speak in Tokyo. Kuroda said in a news conference in March that he rules out the need for further easing measures at this point, unless economic conditions worsen. Market volatility is expected. Analysis: Temporary Insanity and USDJPY
8. US Unemployment Claims: Thursday, 12:30. The number of new claims for unemployment benefits unexpectedly dropped 9,000 last week to a seasonally adjusted 315,000.This was the best reading since November. Economists expected a rise in claims to a level of 334,000. The four-week average fell 6,250 to 330,500, the lowest since early December. Improved weather conditions have contributed to the improvement in the job data. The number of people still receiving benefits after an initial week of aid fell 48,000 to 2.86 million in the week ended March 1. That was the lowest level since December. A small rise to 327,000 is forecasted.
9. US Existing Home Sales: Thursday, 14:00. U.S. existing home sales dropped more than expected in January, reaching an 18 month-low of 4.62 million unit’s annual rate following 4.87 million in the previous month. The cold weather and house shortage were behind this decline. Economists projected a higher figure of 4.73 million. A rise to 4.65 million is predicted now.
10. US Philly Fed Manufacturing Index: Thursday, 14:00. Factory activity in the U.S. mid-Atlantic region contracted in February reaching -6.3 after posting 9.4 in January, amid a fall in new orders. Analysts expected a high reading of 9.2. New orders plunged to -5.2 from 5.1 increase and the employment component contracted to 4.8 from 10.0. However, economists believe manufacturing will pick-up in the coming months. Factory activity is expected to increase to 4.2.