Forex - Weekly outlook: 03.12 - 03.16
The dollar edged lower against a currency basket on Friday after the latest U.S. employment report showed that while jobs growth recorded big gains wage growth remained sluggish, undermining the case for a faster pace of rate hikes this year.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was at 90.06 in late trade, down 0.11% for the day. The index ended the week up 0.17%.
The Labor Department reported that the U.S. economy added 313,000 jobs last month, beating economists’ forecasts of 200,000. It was the largest monthly increase in one-and-a-half years.
But the report also showed that average hourly earnings rose by just 0.1% in February for an annual rate of 2.6%, down from 2.8% in January.
The slowdown in wage growth dampened expectations for four rate hikes by the Federal Reserve this year, bearish for the dollar, which tends to become more attractive to yield-seeking investors when interest rates rise.
The dollar had edged lower earlier in the week amid concerns over trade tensions, following President Donald Trump’s decision to impose heavy tariffs on U.S. imports of steel and aluminum.
The currency regained ground in the following days after the White House said key U.S. trading partners Canada and Mexico would be exempt from the tariffs.
The euro was little changed against the dollar late Friday, with EUR/USD at 1.2308.
The single currency fell in the previous session after European Central Bank President Mario Draghi downplayed a decision to drop the easing bias from the bank’s rate statement.
Draghi also warned that increasing protectionism posed a threat to the outlook for growth in the euro area.
The dollar rose to one-week highs against the yen, with USD/JPY advancing 0.56% to 106.81.
The Japanese currency remained on the back foot after the country’s central bank kept monetary policy unchanged on Friday, as expected, and reiterated that with inflation still well below target monetary easing is likely to continue for some time.
The euro was also higher against the yen on Friday, with EUR/JPY climbing 0.54% to 131.47 in late trade.
Sterling pushed higher against the greenback, with GBP/USD rising 0.33% to 1.3853, boosted by data showing that UK manufacturing production continued to expand.
In the week ahead, investors will be focusing on Tuesday’s U.S. inflation data to gauge how it will affect the outlook for monetary tightening in the coming months.
Reports on U.S. retail sales and euro zone inflation will also be closely watched.
Monday, March 12
Japan is to publish preliminary data on machine tool orders.
Tuesday, March 13
Australia is to release a report on business confidence.
The U.S. is to produce data on consumer inflation.
Bank of Canada Governor Stephen Poloz is to speak at an event in Ontario.
Wednesday, March 14
China is to publish data on industrial production and fixed asset investment.
ECB President Mario Draghi is to speak at an event in Frankfurt.
Later in the day, the U.S. is to release data on retail sales and producer price inflation.
Thursday, March 15
New Zealand is to report on fourth quarter economic growth.
The Swiss National Bank is to announce its latest monetary policy decision and publish its rate statement.
The U.S. is to release a string of economic reports, including data on jobless claims, import prices and manufacturing activity in the New York and Philadelphia regions.
Friday, March 16
The euro zone is to publish revised inflation data.
Canada is to report on manufacturing sales.
The U.S. is to round up the week with data on building permits, housing starts and industrial production.