The USD pared its gain against the EUR on Friday as investors digested the U.S. March Unemployment Report and the Nonfarm Employment Change figures. Last Friday’s Payrolls hit the -80K mark, marking the biggest decline in 5 years. Unemployment also spurred downside risks for the economy as it rose to 5.1% from 4.8%, and heightening the bearish sentiment for the U.S. economy in general. In fact, Fed Chairman Bernanke acknowledged last week that the economic expansion may slow down significantly, as homebuilding, employment and spending deteriorate. As for the USD, it will probably continue to move lower in the next couple of months, until the U.S. economy improves. Fed Chairman Bernanke, for example, expects a return to trend growth as early as 2009.
Export, is another key economic factor. By now, exports are really keeping the U.S. economy from falling into a much deeper recession. The export boost provided by a weaker dollar, which makes American-made goods less expensive for overseas buyers, is helping to avert a deeper slump in manufacturing. This week’s Trade Balance figure may show the trade deficit shrank to $57.5B in March from $58.2B the prior month.
Looking ahead, this week will be quite an eventful one as 3 major central banks – BoJ, ECB, and the BoE will meet to set their monetary policies. On Tuesday, Pending Home Sales are expected to fall, further dragging the U.S. economy down. The Consumer Sentiment report for this month is also expected to drop its lowest in 16 years.
Today, however, we do not expect major price actions in the USD as the Consumer Credit index is the only U.S. data to be released. The volatility is expected pick up on Tuesday as the FOMC will release their Minutes report at 18:00GMT.