Forex – The Week Ahead

While trade talks between the U.S. and China continue to take centre stage, this week we will get an update on the health of the U.S. labour market on Friday and central bank developments will also be in focus.

The February employment report could underline the Federal Reserve’s case for patience when it comes to future interest rate hikes. The consensus forecast is for 180,000 new jobs and an unemployment rate of 3.9%, but wage data will be particularly closely watched at a time when inflation remains low.

Other U.S. economic data reports on tap include figures on new home sales and the Institute for Supply Management’s non-manufacturing index on Tuesday, an update on private sector hiring on Wednesday and housing starts on Friday.

Away from the U.S., the European Central Bank is to announce its latest monetary policy decision on Thursday and President Mario Draghi will speak at a press conference.

The ECB is expected to keep rates on hold, but could drop hints that cheap bank loans are imminent given that euro zone heavyweight Germany is struggling and Italy is in recession. The ECB will also release its latest economic forecasts, with downward revisions looking likely.

The Reserve Bank of Australia and the Bank of Canada are to hold their own rate setting meetings on Tuesday and Wednesday, respectively. Other global economic reports to look out for this week are China’s trade balance on Friday and Australia’s GDP report on Wednesday.

U.K Sterling gained around 1.2% for the week as fears over the prospect of a no-deal Brexit receded, while the Euro ended the week up 0.3% against the greenback.

The dollar rose on Friday, hitting 10-week highs against the Yen as market sentiment was boosted by a more upbeat outlook on some major world economies and the prospect of a trade deal between the U.S. and China.

“Looking at the whole G10 (Group of 10 major currencies) space, there has been more follow-through from U.S.-China trade optimism that was already in the process of getting priced in during the month of February,” said Stephen Gallo, European head of FX strategy, at BMO Capital Markets in London.

“Meanwhile, one of the biggest boosts to the U.S. dollar is coming from a weak yen,” he added.

Reuters contributed to this report