Forex - Weekly outlook: March 31 - April 4

The dollar rose to two-week highs against the yen on Friday, as indications that China’s government is prepared to do more to shore up the cooling economy bolstered risk appetite.

Dollar ends week higher against yen and euro

Market sentiment was boosted after China's premier Li Keqiang said the country has policies in place to counter economic volatility. The remarks eased concerns over recent signs of a slowdown in the world’s second-largest economy.

Data on Friday showing that U.S. consumer spending rose 0.3% last month after a downwardly revised gain of 0.2% in January also lifted the dollar higher against the yen.

USD/JPY rose 0.64% to end Friday’s session at 102.83, the highest since March 12. For the week, the pair gained 0.57%.

The euro edged up from one-month lows against the dollar following the comments, with EUR/USD inching up 0.07% to settle at 1.3752, recovering from lows of 1.3702. The pair ended the week down 0.61%.

The euro remained under pressure after European Central Bank officials indicated earlier in the week that they are considering fresh policy options to stave off the risk of deflation in the region.
ECB governing council member and Bundesbank head Jens Weidmann said Tuesday that a negative deposit rate could be an appropriate way to address the impact of strong gains in the euro.

The same day ECB President Mario Draghi that the central bank stood ready to act if inflation slipped lower than the ECB expected.

Data on Friday showing that the annual rate of inflation in Spain slipped 0.2% in March fuelled concerns that deflation could threaten the economic recovery in the euro area. A separate report showed that the annual rate of inflation in Germany slowed in March.

The dollar was lower against the pound on Friday, with GBP/USD up 0.185 to 1.6640 at the close of trade.

Sterling remained supported after a report on Friday showed that U.K. fourth quarter growth was left unrevised at 0.7% for the final three months of 2013. Another report showed that the U.K. current account deficit came in at a larger-than-expected 22.4 billion pounds in the fourth quarter.

Elsewhere, the Australian dollar rose to a four-month high of 0.9295 against the greenback on Friday, before trimming back gains slightly to settle at 0.9247. AUD/USD ended the week with gains of 1.33%.

The Aussie was boosted as recent reports indicated that the economy is picking up, while hopes for fresh stimulus measures from China also supported the Australian’s dollar’s gains. Meanwhile, NZD/USD edged down 0.18% to 0.8654 at the close on Friday, after hitting two-and-a-half year highs of 0.8696 earlier in the session. The pair ended the week with gains of 1.31%.

In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for March for further indications on the strength of the labor market, while Monday’s euro zone inflation report will also be in focus, ahead of the ECB policy meeting and press conference on Thursday.

Monday, March 31

Japan is to release preliminary data on industrial production.

New Zealand is to produce private sector data on business confidence, while Australia is to publish data on private sector credit.

Switzerland is to publish its KOF economic barometer.

The U.K. is to release data on net lending to individuals.

The euro zone is to produce preliminary data on consumer price inflation, which accounts for the majority of overall inflation.

Canada is to publish the monthly report on gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.

Tuesday, April 1

Japan is to publish its Tankan manufacturing and non-manufacturing index, as well as data on average cash earnings.

China is to release data on manufacturing activity.

The Reserve Bank of Australia is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

The euro zone is to release data on the unemployment rate. Germany is release data on the change in the number of people unemployed, while Spain and Italy are to release reports on manufacturing activity.

Switzerland is to release its SVME manufacturing index.

The U.K. is to release data on manufacturing activity.

Later Tuesday, the Institute of Supply Management is to publish a report on U.S. manufacturing growth.

Wednesday, April 2

Australia is to produce data on building approvals, a leading indicator of future construction activity.

The U.K. is to produce private sector data on house price inflation, as well as official data on construction activity.

In the euro zone, Spain is release data on the change in the number of people unemployed.

The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on factory orders.

Thursday, April 3

Australia is to release data on retail sales and the trade balance, the difference in value between imports and exports.

China is to produce data on service sector activity.

The euro zone is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. Spain and Italy are to publish data on service sector activity.

The U.K. is also to release data on service sector growth, while the Bank of England is to announce its benchmark interest rate.

Later in the day, the European Central Bank is to announce its benchmark interest rate. The announcement is to be followed by a press conference with President Mario Draghi.

Both the U.S. and Canada are to publish data on the trade balance, and the U.S. is also to publish the weekly report on initial jobless claims. Meanwhile, the ISM is to publish a report service sector activity.

Friday, April 4

Germany is to publish data on factory orders.

Canada is to publish data on the change in the number of people employed and the unemployment rate. The nation is also to publish its Ivey PMI

The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.