The G7 gave Japan another thumbs up on its aggressive monetary easing policy, which has put extreme downward pressure on the Japanese yen, with leaders ending last week’s meeting with relatively soft communication on currency markets. Meanwhile, the yen’s technical storm mounted and may continue this week after the Japanese unit finally dropped to the wrong side of a key technical barrier and hit fresh four-year lows against a rapidly advancing US dollar.
A visibly bullish greenback is currently in full command, and may add to gains if this week’s meetings in Europe disappoint and if first-quarter eurozone GDP data raises fresh concerns about the 17-member economy. Concerns about economic weakness in the periphery continuing to squeeze Europe’s core economies such as Germany and France will be answered this week with the critical Q1 GDP data due to land tomorrow. There should also be plenty of focus on the British economy in the coming days as investors anticipate the country’s latest unemployment numbers and the Bank of England’s Quarterly Inflation Report. Sterling is another currency failing to keep pace with the US dollar, dropping to a two-week low ahead of this week’s UK updates.
Sterling
There should be plenty of focus on this week’s UK unemployment figures, with analysts forecasting another jump in the total number of people out of work in the three months to March, which could be an uncomfortable development for the British pound. However, the data lands prior to the Bank of England’s Quarterly Inflation Report which will offer investors more accurate insight into Britain’s economic outlook and the central bank’s position on monetary policy.
US dollar
A refreshed and bullish US dollar is unlikely to surrender much of its recent strength in the coming days, especially if investors take a step back from the euro ahead of crucial eurozone GDP data that may inflate concerns about looser European Central Bank policy later this week. However, the US dollar could wobble on if US inflation data falls as expected, supporting the case for the Federal Reserve to keep up its monthly programme of asset purchases.
Euro
Concerns about economic weakness in the periphery continuing to squeeze Europe’s core economies such as Germany and France will be answered this week with critical Q1 GDP data due. A first estimate on eurozone economic growth is expected to show another negative for the first quarter. However, any weakness in numbers from Germany and France may underscore worries about more European Central Bank policy action that could lead to a more vulnerable euro.