FX Week Ahead Overview:
- The first week of April produces a relatively thin economic calendar, but there are several ‘high’ rated reports from around the world that will drive volatility.
- Aside from several Federal Reserve policymakers giving speeches, the March US ISM Services PMI and the March FOMC meeting minutes will be released.
- Jobs data from Canada at the end of the week should underscore the need for the Bank of Canada to continue to raise interest rates.
For the full week ahead, please visit the DailyFX Economic Calendar.
04/05 TUESDAY| 04:30 GMT | AUD RBA Interest Rate Decision
The Reserve Bank of Australia is still in a holding pattern as it waits for the federal elections to take place by May. Thereafter, against the backdrop where the Australian unemployment rate at 4.2% is already on-par with the RBA’s 2022 year-end forecast, the RBA is poised to raise rates quickly. Rising commodity prices will bolster inflation pressures during the interim period between now and June, warranting quick action once political obstacles are hurdled. The underlying hawkish tone deployed by the RBA should prove supportive for the Australian Dollar.
04/05 TUESDAY | 14:00 GMT | USD ISM Services (Non-Manufacturing) PMI
Nearly 80% of the US economy revolves around services, which heightens attention around the US ISM services PMI as a proxy for US growth. The non-manufacturing gauge of activity is expected to show accelerating momentum in March, with the headline reading due in at 58.4 from 56.5. This would be welcomed news for 1Q’22 US GDP estimates, which are currently hovering around +1.5% annualized. The data, should it meet expectations, will help keep Fed rate hike odds pointing higher, which have been supportive of a stronger US Dollar.
04/06 WEDNESDAY | 18:00 GMT | USD March FOMC Minutes
The March Fed meeting produced a new Summary of Economic Projections (SEP), and the discussion around those forecasts are likely to draw the greatest scrutiny by market participants when the March FOMC minutes are released on Wednesday. But beyond the rationale for changing forecasts, it’s likely that the FOMC minutes come and go without much of a market impact. Since the March Fed meeting, Fed policymakers have given dozens of speeches; there will be another smattering of remarks given this week as well. As such, the March FOMC minutes are somewhat dated and may not change the trajectory of Fed rate hike odds for May.
04/07 THURSDAY | 11:00 GMT | MXN Inflation Rate (MAR)
Banxico is in the midst of a rate hike cycle and will likely continue to raise rates, even if Mexican President Andres Manuel Lopez Obrador has played spoiler by pre-announcing the most recent rate decision. According to a Bloomberg News survey, the March Mexican inflation rate (CPI) is expected to show a slight acceleration to +7.36% from +7.28% (y/y). With commodity prices continuing to rise, Mexican inflation readings may be tilted higher for the foreseeable future, underpinning improving terms of trade for the Mexican Peso.
04/08 FRIDAY | 12:30 GMT | CAD Employment Change & Unemployment Rate (MAR)
The Canadian economy has gained steam in recent months, thanks in part to the Russo-Ukrainian war: market participants are looking for alternative sources to Russia’s commodities, and Canada can help fill the void. With lockdowns lifted and energy prices moving higher, the Canadian economy likely saw strong jobs growth last month and will do so for the foreseeable future. According to a Bloomberg News survey, the Canadian economy added +80K jobs in March after gaining +336.6K jobs in February, which will help the unemployment rate fall to 5.3% from 5.5%. The Canadian Dollar should remain on strong footing, as has been the case over the past month.
— Written by Christopher Vecchio, CFA, Senior Strategist