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FX Previous Week Highlights & Top 5 Things to Watch in the Upcoming Week, (Apr 1-5)

Howdy, traders.

I hope you are having an outstanding weekend with family and friends. As you are here now, let’s prepare for fundamentals to get ready for the potential trades in the coming week. Before this, let’s take a quick look at the previous week’s review.

Weekly Review, Mar 25-29

The precious metal gold continued to drop on Friday, heading for its worst month since August 2018. The firmer dollar and equities have faded the demand for safe-haven investments.

The US dollar benefited from Sterling’s sell-off after the UK parliament rejected Prime Minister Theresa May’s proposed deal for the third time.

The Japanese economy shrank in Q3 2018 and improved, though not entirely, in Q4 2018. The economy commenced the New Year quite poorly and has been healing as the quarter progressed.

The recent series of the US-China trade talks concluded, and, of course, progress was reported. This triggered the risk-on sentiment, and the stock market soared as a result.

  • Germany produced a pleasant economic surprise to conclude the quarter.
  • March unemployment slipped to 4.9%, the lowest level since reunification.
  • The prominent surprise was the 0.9% rise in February retail sales. German retail sales surged 4.7% year-over-year.

Both FOMC members, Presidents Williams and Bullard, soft pedalled the impression that there was an urgency to cut rates, which caused slight trouble to the US dollar.

Top 5 Economic Events this Week, Apr 1-5

The current week is all about fundamentals, notably the Chinese Caixin Manufacturing PMI, US Core Retail Sales & NFP. These events are too good to miss!

1) Caixin Manufacturing PMI

On Monday, at 1:45 (GMT), the Markit will be releasing the Caixin Manufacturing PMI figures. Lately, the macroeconomic indicators of the world’s second-largest economy are slowing down, and markets are eyeing the severity of the situation.

The independent measure for China’s manufacturing division collapsed to 48.9 in February, showing deepening recession. Another drop will be troubling not only for the Aussie but for the whole world.

2) US Retail & Core Retail Sales

On Monday, the US Census Bureau is due to release the retail sales data at 12:30 (GMT). It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity. Back in December 2018, around Christmas, the American consumer badly disappointed and the volume of sales tumbled. The situation improved in March as the retail sales grew by 0.2% vs. the forecast of 0.0%.

This month, economists are expecting a 0.3% rise in retail sales and a 0.4% rise in core retail sales. A higher number of sales indicate higher inflation and a growing economy. So, the positive data will be good for the Greenback.

3) Australian Rate Decision

The Reserve Bank of Australia hasn’t changed its interest rate since 2016 but has formed a dovish shift, symbolizing that the bias is no longer towards boosting rates.

The April decision is unlikely to end in a rate cut, but broader concern about the global market and the local housing sector could weigh. The odds of any change to the record-low cash rate of 1.50% are minimal. The event may have a muted impact unless RBA also comes up with a dovish statement, just like the RBNZ did last week.

4) Core Durable Goods Orders

The Census Bureau is due to release core durable goods orders data on Tuesday at 12:30 (GMT). It’s one of the major economic indicators that measure the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items. The orders are expected to drop by -1.1% which is way lower than the 0.3% gain in March 2019.

Obviously, the prolonged partial shutdown of the US government has hurt the market sentiment. The dollar is likely to stay under pressure over this indicator.

5) US Labor Market Report

Back in March, the US jobs report for February was a huge disappointment as just 20K positions were added to the world’s largest economy. However, wages increased by 0.4% m/m and 3.4% y/y – impressive numbers.

For the beginners, the US Nonfarm employment change is one of the most awaited and watched economic data of the month. This month, the unemployment rate is expected to remain unchanged at 3.8%. The non-farm employment change is supposed to have produced 175K jobs vs. 20K in March which is a phenomenal improvement.

This week is going to be exciting with a large number of economic events. So, brace yourself for volatility and stay tuned to FX Leaders for updates.

Good luck!

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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