Highlights of the coming week
The market remains optimistic about the prospects for the development of the world economy. Last week, the Federal Reserve reaffirmed its commitment to implementing a stimulating monetary policy, and preliminary GDP data for the 1st quarter showed good growth rates (+ 6.4%). These events leveled fears of an increase in COVID-19 incidence in India, Japan, Brazil and other countries.
The Fed's soft rhetoric continues to put pressure on the US currency, but strong macroeconomic statistics partially offset this pressure. Last week, inflation expectations in the United States peaked since April 2013. This could provoke a new increase in the yield of American trigeris, which in March provided strong support to the dollar.
Next week, the main benchmark for the dollar will be data on the US labor market. Preliminary reports indicate an increase in key indicators. Investors will also follow the meetings of the Reserve Bank of Australia and the Bank of England.
Australia - RBA Meeting
The market does not expect surprises from the upcoming meeting of the RBA. Investors bet that the regulator will keep the rate unchanged at a record low of 0.1% and leave the volume of the asset buyback program unchanged. A Reuters poll on Friday showed that the vast majority of economists expect the regulator to maintain current monetary policy parameters until mid-2023.
Against this background, we should expect a restrained reaction of the market to the results of the RBA meeting. The soft tone of the regulator's statements may put moderate pressure on the Australian dollar.
UK - Bank of England Meeting
Reports of Britain's success in implementing the population vaccination program continue to support the British currency, but gradually the influence of this factor on the market is weakening. According to many experts, the recovery of the UK economy continues to slip, despite the weakening of quarantine measures. These problems could force the Bank of England to ease monetary policy and increase its asset buyback programme by another £90 billion. But you should not rule out a scenario in which the regulator can postpone the adoption of this decision until June.
The decision to increase the asset buyback program or hints of a possible easing of monetary policy in the future could put significant pressure on the pound.
USA - Nonfarm payrolls
Recent statistics indicate a recovery in the US labor market after the crisis. For the third consecutive week, fewer than 600,000 primary applications for unemployment benefits are registered in the country. These are the minimum values after the beginning of the crisis caused by COVID-19 pandemic.
Most likely, the upcoming Nonfarm payrolls report will show a continuation of the positive trend in the labor market. This may provide strong enough support to the US currency, despite the fact that key indicators are still far from pre-crisis levels.