Key Fundamental Factors this Week (3/30 – 4/3)

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Key Fundamental Factors this Week (3/30 - 4/3)

Last week we saw the USD pressured slightly as durable sales data disappointed, and the Q4 2014 GDP data was revised lower. Yellen spoke on Friday and expressed expectation to raise rates “sometime this year” and will be gradual. The projection for a mid-year rate hike is becoming weaker, but the USD should still maintain strength in the medium-term, given some short-term correction. Let’s take a look at the key fundamental factors this coming week.

Monday (3/30)

German Prelim CPI m/m (Mar.)
Forecast: 0.4%
Previous: 0.9%
german cpi march
(click to enlarge; source: forexfactory.com)

From a month to month basis the strong cpi reading in February countered the negative reading in January. If we can a positive reading in March and can string together a couple more months of cpi reading above 0.1%, we can start seeing a shift in the ECB’s tone on inflation. The anticipation of the ECB becoming less dovish can help support the ailing euro.

Tuesday (3/31)

ANZ Business Confidence (Mar.)
Previous 34.4
ANZ business cofidnece
(click to enlarge; source: forexfactory.com)
Business sentiment has been improving, but still off of the 70.8 peak in Feb. 2014. If the ANZ business confidence reading climbs back near 50, we should also be seeing other economic data improve in Australia and that should help it find support or at least slow down its decline against the USD.

UK Current Account (Q4 2014)
Forecast: -21.2B
Previous: -27.0
UK Final GDP q/q (Q4)
Forecast: 0.5%
Previous estimate: 0.5%
Q3 GDP: 0.7%

CAN GDP m/m (Jan.)
Forecast: 0.2%
Previous: 0.3%
After a negative reading in November, GDP numbers have rebounded to the positive side. with a 0.3% in December. The January reading is expected to remain positive, but the 0.2% forecast is relatively low (this would be annualized to 2.4%, which is very slow annual growth). A reading around 0.5% might be needed to give the CAD some support.

US CB Consumer Confidence (Mar.)
Forecast: 96.6
Previous: 96.4
cb consumer confidence
(click to enlarge; source: forexfactory.com)
According to the Conference Board, consumers are still optimistic despite a slide since January’s 103.8 reading. The strong consumer confidence prints underpin the FOMC’s positive economic outlook in spite of recent data that shows an economy stalling a bit. But other than a positive economic outlook, the FOMC is looking for that to translate into wage growth before starting its “gradual” rate hike campaign.Wednesday (4/1)

AUS Building Approvals m/m (Feb.)
Forecast: -3.7%
Previous: 7.9%

UK Manufacturing PMI (Feb.)
Forecast: 54.5
Previous: 54.1
uk manufacturing pmi march
(click to enlarge; source: forexfactory.com)
Manufacturing growth has been picking up a bit since the turn of the year. Continuing growth in this sector should help support growth in the job market. It is also an indication that demand is picking up, which should also support inflation. Therefore, we can start to expect the BoE to be less dovish. If the BoE puts takes a rate cut this year off the table, we should expect a rebound in GBP/USD.

US ADP Non-Farm Employment Change (Mar.)
Forecast: 231K
Previous: 212K
There is usually some near-term reaction to this jobs data, but traders’s focus will mainly be on the Friday’s official Non-Farm Payroll data from the labor department. Nonetheless, we can see that the expectation is for stronger jobs growth in March compared with February. However, we might need to see a reading above 250K to impress and give the USD a boost because the USD has been showing signs of exhaustion to its rally that took off in the second half of 2014.

Thursday (4/2)

AUS Trade Balance (Feb.)
Forecast: -1.25B
Previous: -0.98B
As long as the trade balance is negative, RBA chief Glenn Stevens will likely jawbone about the Aussie’s overvaluation and how its hurting exports.

CAN Trade Balance (Feb.)
Forecast: -1.8B
Previous: -2.5B

US Trade Balance (Feb.)
Forecast: -41.5B
Previous: -41.8B

From the forex markets, there is not much focus these days on the trade balance, which can have long-term effects on the currency, but is a poor indicator of short-term moves unless a strong trend is picking up towards further imbalances.

US Jobless Claims (weekly)
Forecast: 285K
Previous Week: 282K

Friday (4/3)

US Non-Farm Payroll (Mar.)
Forecast: 251K
Previous: 295K
us nfp
(click to enlarge; source: forexfactory.com)
US Unemployment Rate (Mar.)
Forecast: 5.5%
Previous: 5.5%Here’s the thing about the labor market. The headline numbers have been improving in terms of jobs added and the overall unemployment rate. However, participation rate and wage growth will need to pick up for the FOMC to be convinced that these impressive jobs numbers are sustainable.

It seems like the market will be more sensitive to a reading that misses forecast than to a reading above forecast. Last month, the reading was way above forecast (295K vs. 240 Forecast), and the USD only edged up slightly higher against the basket of currencies.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.