Forex Market Outlook for the Week April 05 – 09, 2021

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The key economic data releases scheduled for the upcoming week include the minutes of the last FOMC meeting, ISM services PMI for the US, and the RBA monetary policy decision. Investors will also focus on any negotiations between Republicans and Democrats over the $2 trillion infrastructure plan announced by President Joe Biden and the coronavirus figures, especially in Europe where the infection numbers are rising and nations are imposing tighter restrictions. Financial markets in China, the UK, Germany, and Australia will remain closed on Monday because of holidays. Having said that here is an outlook on a few important announcements from around the world:

#1: United States ISM Services PMI (04/05/2021 Monday 15:00 GMT)

In the United States, the Services PMI reported by the Institute for Supply Management (ISM) dropped to the 55.3 level in February from the 58.7 level in January. The reading for the month came in well below analysts’ expectations that the index will remain at the 58.7 level. The reading, however, pointed towards the lowest growth rate in the services sector ever since the contraction in May last year amid higher prices and supply constraints. Supplier deliveries, business activity or production, new orders, and employment declined, while price pressures increased. Export orders and inventories rebounded. According to the ISM’s Chair, respondents remained mostly optimistic as regards the economy and business recovery. However, he noted that production-capacity constraints, logistics challenges, material shortages, and human resources availability impacted the supply chain.

Forecast for March 2021: 58.3

#2: Australia RBA Rate Statement (04/06/2021 Tuesday 05:30 GMT)

forex market outlookThe Reserve Bank of Australia releases the Rate Statement on the first Tuesday of every month, excluding January. The central bank uses the Rate Statement as a tool for communicating with investors as regards the monetary policy. In addition to providing the outcome of the members’ decision on interest rates, it offers commentary on the economic conditions that impacted their decision. More importantly, it projects the economic outlook of the nation and offers clues on future decisions. If the tone of the Rate Statement is more hawkish than expected, it is good for the Australian dollar.

#3: Australia Cash Rate (04/06/2021 Tuesday 05:30 GMT)

In the meeting held in March, the Reserve Bank of Australia decided to leave the cash rate steady at the record low level of 0.1 percent as analysts expected. Policymakers said that the current monetary policy helped the country in keeping the financing costs at a low level and contributed to lowering the exchange rate. The central bank further noted that it is ready to make additional adjustments to its bond purchase program in response to market conditions. Policymakers also reiterated that the RBA is not likely to increase the cash rate until inflation remains sustainably within the 2.0 to 3.0 percent target. The central bank does not expect inflation to remain within this range until 2024. As regards the GDP, the expectation is that the economy will grow 3.5 percent over both 2021 and 2022. Meanwhile, the unemployment rate is expected to decline and touch the 6.0 percent level towards the end of 2021 and 5.5 percent level towards the end of 2022. Inflation is expected to increase temporarily because of the reversal of COVID-19-related reduction in prices.

Forecast for April 2021: 0.10 percent

#4: United States Crude Oil Inventories (04/06/2021 Tuesday 15:30 GMT)

In the United States, crude oil stocks dropped by 0.876 million barrels during the week that ended on March 26 and ending the increases recorded for a period of five weeks. The figure for the week missed analysts’ expectations for an increase of 0.107 million barrels. In the meantime, gasoline stocks dropped 1.735 million barrels. Analysts had expected stocks to increase by 0.730 million barrels.

#5: United States FOMC Meeting Minutes (04/06/2021 Tuesday 19:00 GMT)

The Federal Open Market Committee releases the minutes of the meeting eight times every year three weeks after the announcement of the Federal Funds Rate. It provides a detailed account of the most recent meeting of the FOMC and offers in-depth insights into the financial and economic conditions that impacted their decision as regards setting interest rates. If the tone of the Rate Statement is more hawkish than expected, it is good for the greenback.

#6: United States Fed Chair Powell Speaks (04/08/2021 Thursday 17:00 GMT)

Jerome Powell, Federal Reserve Chair, is scheduled to partake in a panel discussion about the global economy at a virtual seminar organized by the International Monetary Fund. Audience questions expected. Markets often turn volatile during his speeches as traders make an attempt to understand the direction of interest rates.

#7: Australia RBA Financial Stability Review (04/09/2021 Friday 02:30 GMT)

The Financial Stability Report released by the Reserve Bank of Australia assesses the conditions of the financial system and potential risks related to financial stability such as strains and imbalances. The report provides insights into the future course of the monetary policy.

#8: Canada Employment Change (04/09/2021 Friday 13:30 GMT)

Canada added 259,000 jobs in February, following a loss of 266,000 jobs over the past two months. The reading for the month came above analysts’ expectations that 75,000 jobs will be added. While part-time jobs increased by 171,000, full-time jobs rose by 88,000. The number of Canadians working in the retail sector increased 122,000, following the lifting of restrictions imposed on non-essential stores in many regions. Employment in the food services and accommodation industries rose, driven primarily by Alberta and Ontario. Further, employment increased in Quebec and Ontario and coincided with the easing of public health restrictions in most of the areas of both the provinces. Additionally, employment increased in Alberta, British Columbia, and Manitoba. However, employment declined in Labrador and Newfoundland.

Forecast for March 2021: 90,000

#9: Canada Unemployment Rate (04/09/2021 Friday 13:30 GMT)

In Canada, the unemployment rate fell to the 8.2 percent level in February. This is by far the lowest rate ever since March 2020. In January, the jobless rate stood at the 9.4 percent level. The reading for the month came in much lower than analysts’ expectations of 9.2 percent. This reduction in the jobless rate was attributed to the lifting of public health restrictions imposed in many provinces towards the end of December last year. This enabled the reopening of several non-essential businesses and a few in-person dining and cultural and recreational facilities. The labor underutilization rate dropped 1.8 percentage points to the 16.6 percent level, the lowest ever level since February 2020.

Forecast for March 2021: 8.0 percent

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