Forex Weekly Outlook April 9-13 - Can the dollar continue higher?

[michel]

The US dollar extended its recovery in the new quarter, at least against the majors. Is this trend real? US inflation data and the FOMC meeting minutes stand out in the second week of April. Here are the highlights for the upcoming week.

 

The US gained only 103K jobs in March, fewer than expected. However, wage growth accelerated to 2.7%, in line with early projections. The greenback continued its recovery against its major peers, clawing back lost ground, regardless of the turbulence in stocks and the worsening tensions around trade. The only exception was the Canadian dollar, which enjoyed a strong gain in domestic jobs and also the rising chances for a deal on NAFTA.

 

Updates:

1. US PPI: Tuesday, 12:30. The Producer Price Index is often considered a leading indicator towards the more significant Consumer Price Index. Prices at factory gates perpetuate further. Headline PPI is expected to rise by 0.1% m/m in March, half the rate of February, while Core PPI is forecast to repeat the previous gain of 0.2%.
   
2. Mario Draghi talks Wednesday, 11:00. The President of the European Central Bank will appear in front of a student conference in Frankfurt and will also take questions from the crowd. He will have an opportunity to respond to the growing signs of a slowdown in the euro-zone economies, or at least the peak of the cycle, around December. Any comments about inflation will be interesting to watch.
   
3. US inflation: Wednesday, 12:30. Inflation remains the missing ingredient in the US growth story. Despite healthy gains in jobs and decent GDP growth, inflation remains stubbornly low. Core CPI remained stuck at 1.8% y/y in February with a monthly rise of 0.2%. This time, yet another 0.2% increase is expected in core CPI while headline prices are projected to remain unchanged in March.
   
4. FOMC Meeting Minutes: Wednesday, 18:00. The Fed releases the minutes from the first meeting overseen by Fed Chair Jerome Powell. While the FOMC raised rates and upgrade the outlook for 2019 and 2020, they did not upgrade the prospects for 2018. The meeting minutes may shed some light on the deliberations. Is the sentiment growing more hawkish and are they on the verge of a fourth hike? How worried are they on the ongoing jitters around global trade? We may get a notion of the mindset.
   
5. ECB Meeting Minutes: Thursday, 11:30. These are minutes from the ECB’s meeting in March, where forecasts were hardly changed and Draghi made an effort to downplay the slightly more hawkish stance in the statement. The publication is over a month after the event, making it somewhat stale as we have received quite a few data points since then. However, the ongoing battle between the hawks and the doves about ending QE and a potential rate hike somewhere in 2019 rages on.
   
6. US Consumer Confidence: Friday, 14:00. The preliminary release of the University of Michigan’s consumer confidence provides an outlook towards the retail sale sales. In March, the figure reached 101.4 points, higher than in previous months and above the round number of 100. A minor slide to 100.8 points is on the cards now.
   
7. JOLTS Job Openings: Friday, 14:00. This lagging indicator for the jobs market is watched closely by the Fed and is of importance after jumping to an annualized level of 6.31 million back in January. The data for February is projected to show a dip to 6.22 million. The number of quits is also of interest as it is a measure of confidence. More quits imply people are confident to move on, and often to better jobs.