USD Weekly Outlook (May 4-8)


The US dollar continued to backslide last week, falling nearly 2% against a basket of currencies as weak economic data kept demand for the greenback relatively subdued. At the same time, the euro and British pound mounted large come backs, with the EUR/USD and GBP/USD each touching two-month highs.

The US dollar index closed at 95.30 on Friday. The EUR/USD was trading closer to 1.13 and the GBP/USD closed well above the 1.51 threshold.

The week ahead could be highly active for US dollar pairs, as the markets brace for a high profile jobs report on Friday. Meanwhile, negotiations between Greece and the European Union broke down over the weekend, pushing Athens closer to default.

The biggest European event this week takes place on Tuesday when the European Commission releases revised GDP forecasts. The European Commission upgraded its 2015 outlook on GDP in its winter report, forecasting growth of 1.7% for the EU and 1.3% for the Eurozone.

In economic data, Germany will release March factory orders, industrial production and trade figures throughout the week.

In the United States, the major focus will be on April jobs data. On Wednesday the ADP Institute is expected to show the creation of 205,000 private payrolls in April after job growth slowed to 189,000 in March. The April report could show job creation as low as 170,000 or as high as 295,000, according to economists in a Bloomberg poll.

The Department of Labor will release the official jobs report on Friday. Like the ADP report, the official figures are expected to show a large rebound in hiring activity, with the median estimate of economists forecasting a gain of 220,000. The consensus range was 180,000 to 335,000, according to Bloomberg.

Job creation slowed to just 126,000 in March, as severe winter weather and headwinds in the manufacturing sector weighed on hiring. The March rate was also the lowest since 2013.

Unemployment is forecast to drop to 5.4% in April from 5.5% the previous month, according to economists. The participation rate – the percentage of working-age Americans employed or actively searching for work – is expected to remain at 62.7%.

Average hourly earnings are forecast to rise 0.2% in April after growing at a rate of 0.3% the previous month. This translates into a year-over-year gain of around 2%.