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FX Week Ahead - Top 5 Events: Biden Stimulus Speech; China Manufacturing PMI; UK GDP; US Manufacturing PMI; US NFP

FX Week Ahead - Top 5 Events: Biden Stimulus Speech; China Manufacturing PMI; UK GDP; US Manufacturing PMI; US NFP

Christopher Vecchio, CFA, Senior Strategist
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FX Week Ahead Overview:

  • The economic calendar has a distinct US-focus as the calendar turns from March to April, and from 1Q’21 to 2Q’21 (US consumer confidence, President Biden speech on infrastructure stimulus, ISM Manufacturing & Markit Manufacturing PMI, and US nonfarm payrolls).
  • Signs of inflation heating up may be ignored (German and Euroarea inflation rates), while evidence that major economies have struggled may be overlooked (UK GDP).
  • On balance, recent changes in retail trader positioning suggest that the US Dollar has a bearish bias.

For the full week ahead, please visit the DailyFX Economic Calendar.

03/31 WEDNESDAY | 00:30 GMT | CNY NBS Manufacturing PMI (MAR)

Tensions between the US and China are heating up, with many indications suggesting that the Trump-inspired US-China trade war will continue with under the Biden administration – and perhaps intensify. Ahead of anything else intensifying, data releases are due to show that China’s manufacturing sector is still growing, but barely. The March China NBS manufacturing PMI is expected to cross the wires with a reading of 51.2, according to a Bloomberg News survey, up from the 50.6 reading in February.

03/31 WEDNESDAY |06:00 GMT | GBP Growth Rate (4Q’20)

Even as the UK remains among the best in the world in terms of vaccination rates, the outbreak of the B.1.1.7 mutation of COVID-19 still managed to slow things down at the end of last year. According to a Bloomberg News survey, the final UK growth rate update for 4Q’20 is due to show a slight improvement, from -8.7% to -7.8% (y/y). Nevertheless, any issues seen in the final 4Q’20 UK GDP data may be overlooked as markets continue to look forward to the UK regaining its pre-COVID economic potential.

IG Client Sentiment Index: GBP/USD Rate Forecast (March 29, 2021) (Chart 1)

FX Week Ahead - Top 5 Events: Biden Stimulus Speech; China Manufacturing PMI; UK GDP; US Manufacturing PMI; US NFP

GBP/USD: Retail trader data shows 51.55% of traders are net-long with the ratio of traders long to short at 1.06 to 1. The number of traders net-long is 1.03% lower than yesterday and 21.51% lower from last week, while the number of traders net-short is 14.46% higher than yesterday and 13.02% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

04/01 THURSDAY | 00:00 GMT | USD President Biden Speech on Recovery Package

US President Joe Biden has already seen his $1.9 trillion stimulus program pass into law, but he’s not done yet. Midweek, the American president will not only deliver remarks regarding the deployment of the first stimulus package and an update on COVID-19 vaccination efforts, but will also outline the framework for a sweeping infrastructure spending program, encompassing climate change and public education. While it remains to be seen whether or not the Biden administration prioritizes changes to the Senate filibuster is another story, but the markets may soon have a new carrot to chase.

04/01 THURSDAY | 13:45, 14:00 GMT | USD Markit Manufacturing PMI (MAR), USD ISM Manufacturing PMI (MAR)

The US economy is gaining steam, at least in the manufacturing sector, which accounts for around 12% of all US jobs. Both readings of the sector due out from Markit IHS and the Institute of Supply Managers (ISM) suggest that March was a stronger month than February. The Markit Manufacturing PMI survey is due in at 59 from 58.6, while the ISM Manufacturing PMI is expected at 61.3 from 60.8. Cumulatively, running at a pace near 60 suggests that US economic data momentum is improving as vaccination efforts accelerate, priming the US economy for a strong 2Q’21.

04/02 FRIDAY | 12:30 GMT | USD Nonfarm Payrolls & Unemployment Rate (MAR)

Following the surprisingly strong reading for February, the US labor market is looking to build on that momentum with a reading nearly twice as strong. Consensus surveys from Bloomberg News see the world’s largest economy having added +675K jobs in March following the gain of +379K jobs in February. The unemployment rate (U3) is set to drop from 6.2% to 6%.At the end of the week, the US jobs report may serve as a key stepping stone to reinvigorating the US-centric ‘reflation trade’: higher yields, higher equities, and a higher US Dollar.

IG Client Sentiment Index: EUR/USD Rate Forecast (March 29, 2021) (Chart 2)

FX Week Ahead - Top 5 Events: Biden Stimulus Speech; China Manufacturing PMI; UK GDP; US Manufacturing PMI; US NFP

EUR/USD: Retail trader data shows 53.71% of traders are net-long with the ratio of traders long to short at 1.16 to 1. The number of traders net-long is 5.91% higher than yesterday and 19.69% higher from last week, while the number of traders net-short is 20.68% higher than yesterday and 9.13% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall.

Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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