• Last week recap: USD edged higher on Friday and ended consecutive weekly losses, Eurozone Q1 GDP shows the economy technically in recession
• This week ahead: RBA and Bank of England monetary policy announcement, US non-farm payrolls and Canadian job report
USD was significantly higher on Friday, with DXY Index up about 0.7% to 91.28 and is now trading around 91.23. The uptrend on Friday effectively ended its multi week loss, bringing the weekly gain to the positive region. Moreover, it has also brought up the April loss from potentially -2.8% to -1.8%. USD’s weakness is largely due to Fed’s dovish monetary policy, despite it acknowledging that there has been impressive improvement in the economic conditions as shown by the Q1 GDP. In stark contrast, Eurozone’s Q1 ended with technical recession, defined as two consecutive quarters of negative growth. Data released last week show that, Eurozone contracted at -0.6% (versus the prior quarter at -0.7%), Germany at -1.6% (versus the prior quarter at +0.5%), and France at +0.4%.
In Asia, USDKRW rose 0.4% to 1,111.85 right after South Korea’s industrial output landed at -0.8% in March, versus the expectation at +0.1%. Moreover, USDTRY dropped 0.1% to 8.23093 after Turkey’s central bank raised its year-end inflation forecast from 9.4% to 12.2%. The new governor said that, tight policy would be maintained until price pressure eases.
This week ahead, we will have several major events. On rate decisions, RBA and BoE will make their monetary policy announcement. Scotland will hold its parliamentary elections, thus potentially leading to a volatile week for GBP as market expects some risks of another referendum on independence. On the economic front, US will release its April’s non-farm payrolls but it is unclear whether it would shake the FX market as the central bank is not anticipated to act in the short term. For this reason, the Canadian job report is likely to be more interesting as BoC might act swiftly just like it did last time.