US and international data will influence the direction of the US dollar this week, as investors weigh the latest Fed-speak against the most recent economic indicators. The US dollar bounced back last week, climbing to its highest level in more than three weeks.
The US dollar index closed at 99.41 last Friday, strengthening against the euro, British pound and Canadian dollar.
The Department of Commerce will report on retail sales for March. Sales are forecast to rise 1.1% in March after tumbling 0.6% in February. Retail sales are used as a proxy for consumer spending.
Separately, the Department of Labor will report on producer prices for March. The producer price index is forecast to advance 0.3% in March after declining 0.5% the month before.
In Europe, the Office for National Statistics will release UK CPI. The annual consumer price index is forecast to remain flat in March, according to a median estimate of economists.
The Board of Governors of the Federal Reserve System will release monthly factory data in mid-week trading. Industrial production – a gauge of factory activity in the manufacturing, mining and utilities sectors – is forecast to decline 0.3% in March. The capacity utilization rate is expected to drop to 78.7% from 78.9%.
Separately, the European Central Bank will hold a press conference after its monthly meetings on Wednesday. ECB President Mario Draghi will likely comment on the central bank’s recently-implemented quantitative easing program, which appears to have rejuvenated the euro area’s recovery.
The ECB will ease up to €1.1 trillion into the Eurozone economy over the next year-and-a-half.
Housing figures make headlines in the latter half of the week when the US government reports on housing starts and building permits. Housing starts plunged 17% to a seasonally adjusted annual rate of 897,000 in February, as the harsh winter weather weighed on economic activity.
Building permits, which are less sensitive to the weather, rose 3% to a seasonally adjusted annual rate of 2.304 million.
The Commerce Department will close out the week with a report on March CPI. The consumer price index of goods and services is forecast to rise 0.2% in March, following a similar gain in February. Excluding food and energy, the monthly CPI rate is forecast to rise just 0.1%.
Separately, the European Commission will release preliminary Eurozone CPI data for March.
The EUR/USD moved closer to parity last week amid ongoing tensions concerning Greece’s bailout and divergent monetary policy between the ECB and the Federal Reserve. Demand for the US dollar continues to be underpinned by rate hike expectations, regardless of how slow the process will be. Analysts are also optimistic that US employment numbers will rebound in the coming months as the impact of severe weather dissipates.
The GBP/USD plunged to a nearly 5-year low last week, as the Bank of England kept interest rates at a record low of 0.5%, signaling the first time since WWII that monetary policy was left unchanged for the duration of parliament. The GBP/USD closed the week at 1.4629. The UK’s biggest release comes Friday when the ONS releases official employment numbers for March.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.