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Weekly Outlook: March 13 - 17

3/13/2017, 11:18:45 AMMarket Analysis
Weekly Outlook: March 13 - 17

The U.S. dollar retreated against a basket of the other major currencies on Friday, after the latest U.S. employment report showed that jobs growth beat expectations, but wage growth remained tepid.

The U.S. economy added 235,000 jobs in February from the prior month, as the construction sector recorded its largest gain in nearly 10 years due to unseasonably warm weather, the Labor Department said Friday.

The unemployment rate ticked down to 4.7% from 4.8% in January, even as more people rushed into the labor market.

However, average hourly earnings rose just 0.2% in February from a year earlier, below expectations for a 0.3% rise. The small gain lifted the year-on-year increase in earnings to 2.8%, disappointing some investors.

U.S. short-term interest rate futures were little changed following the employment report, according to Investing.com’s Fed Rate Monitor Tool, underscoring the likelihood that the U.S. central bank will raise rates next week and two more times in 2017.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dropped 0.6% to close at 101.38 on Friday. It touched 101.17 earlier, its lowest since February 28, amid disappointment that wages were only growing gradually.

The index dropped 0.3% for the week, snapping a four-week win streak.

The dollar was slightly lower against the yen, with USD/JPY down 0.15% to 114.80 late Friday, after scaling a peak of 115.51 earlier, its highest since January 19. Despite Friday's losses, the dollar still rose roughly 0.6% against the yen for the week.

Meanwhile, the euro rallied, with EUR/USD advancing almost 1% to 1.0678, after reaching a high of 1.0699, the strongest level since February 9. It was up around 0.5% for the week.

The euro jumped late on Friday, after a report surfaced that the European Central Bank had discussed the possibility of introducing a rate hike before the end of its quantitative easing program.

The report came fresh off the heels of a somewhat hawkish comments from ECB President Mario Draghi at the bank’s post-policy meeting press conference on Thursday. Mr. Draghi said “there is no longer that sense of urgency” for the central bank to use ultra-loose monetary policy to achieve its mandates.

Sterling was also higher, with GBP/USD up around 0.1% at 1.2170 in late trade, after plumbing a low of 1.2134 overnight, its lowest level since January 17.

U.K. Prime Minister Theresa May confirmed during a press conference in Brussels that Britain would start exit negotiations with the European Union by the end of this month.

Global financial markets will be busy with central bank meetings in the week ahead, with policy decisions due in the U.S., Japan, the U.K and Switzerland.

Investors will also keep an eye out for headlines coming out of a two-day meeting of G20 central bankers and finance ministers in Germany for further hints on the strength of the global economy and the future direction of monetary policy.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, March 13

Japan is to release data on core machinery orders.

Tuesday, March 14

China is to publish figures on industrial production and fixed asset investment.

The ZEW Institute is to report on German economic sentiment.

The U.S. is to produce data on producer price inflation.

Wednesday, March 15

Switzerland is to release data on producer prices.

The UK is to publish its monthly employment report.

The U.S. is to release reports on consumer price inflation, retail sales and manufacturing activity in the New York region.

Later in the day, the Federal Reserve is to announce its latest monetary policy decision and Fed Chair Janet Yellen is to hold a press conference to discuss its updated economic projections.

Thursday, March 16

New Zealand is release data on fourth quarter gross domestic product.

Australia is to release its monthly employment report.

The Bank of Japan is to announce its benchmark interest rate and publish a policy statement outlining economic conditions and the factors affecting the policy decision. The announcement is to be followed by a press conference.

The euro zone is to release revised data on consumer price inflation.

The Swiss National Bank is to announce its Libor rate decision and publish its monetary policy assessment.

The Bank of England is to announce its latest interest rate decision and publish the minutes of its policy meeting.

Canada is to produce data on foreign securities purchases.

The U.S. is to release a series of economic reports, including data on building permits and housing starts, jobless claims and manufacturing activity in the Philadelphia region.

Friday, March 17

Canada is to release a report on manufacturing sales.

The U.S. is to round up the week with a report on industrial production and a preliminary reading of consumer sentiment from the University of Michigan.