Nonfarm Payrolls and inflation in the spotlight

It has been a quite volatile week this one, beginning with the dollar under strong selling pressure, following the latest FED's meeting. Majors run above post-FOMC highs, but suddenly changed course on Thursday, following Atlanta's FED Lockhart, usually a dove, suggesting a potential rate hike in between June and September. 

The dollar benefited also from a recovery in yields, but failed to resume its advance, as macroeconomic data continued to disappoint: Durable Goods Orders unexpectedly fell in February, whilst the final revision of the Q4 GDP showed the economy grew at an annual rate of 2.2%, affecting the like hood of a sooner rate hike. 

European inflation

As April kicks in, the economic calendar will be fulfilled with fresh data that should bring some light to whether this latest dollar fall has been corrective or if a top has come to place. 

On Monday, Germany will release the preliminary figures of March inflation, expected at 0.4% against previous 0.9%. Yearly basis, inflation in the country stands at 0.1%. The EZ will follow on Tuesday, currently at -0.3% compared to an year before, and expected to remain unchanged. Whist German figures may result a bit more encouraging, the EZ has a long road ahead before being able to call the end of deflation. Nevertheless, if inflation ticks higher, ECB's members will be happily palming each other's backs  and cheering the effects of the recently lunched QE program, which means the EUR may receive a temporal boost. However, if inflation drops below previous, the negative influence it will have over the common currency will last longer.

Also next Tuesday, the UK will release GDP data, which has been trending higher. Being a final revision of previous announcements however, the market may hardly react to the numbers, unless there is a strong divergence with the 0.5% growth already announced for the last quarter of 2014.

During the week, the US will release Personal Income data, which is quite relevant considering the FED uses this figures to measure inflation, Housing data, and the Consumer Confidence index amongst other macroeconomic readings. Investors have seen increased concerns over US weak data lately, as a promise of a rate hike is not enough anymore to buy the greenback, particularly if data is not unable to back it up. The market can bear with maybe one more weak number, but if data disappoints day after day next week, dollar's bearish momentum may accelerate into Friday, when the star of the month will made its entrance: the US will release its monthly employment figures then.  

US Nonfarm Payrolls

Usually, US Nonfarm Payrolls can be enough to set dollar's monthly trend, but as explained above, this month may not be the case. The economy has been consistently adding over 240K new jobs monthly basis in average, for almost a year, whilst the unemployment rate stands among FED's target currently at 5.5%. For March, expectations are of a steady unemployment rate a 251K new jobs. Being above the average, the number will be considered good, but not good enough to justify a June rate hike, which means that the market may prefer to go against the greenback, particularly if early week data also resulted tepid. It will take a row of up beating figures during the week plus much better than expected NFP to see the greenback regaining the upside across the board.