– USD to garner support this week amid dovish central banks
The USD is likely to remain better bid this week driven by a number of factors. First, several central banks (RBA, BOE, and ECB) likely to sound more dovish which should de-facto support the USD. Secondly, the USD could receive a risk-off bid given (a) fiscal and property tightening measures in the US and China and (b) an increase in uncertainty over Italian politics. Finally, this week’s non-farm payrolls report is unlikely to provide that catalyst for a weaker USD; our economists see a trend-consistent gain of 160k, with the unemployment rate unchanged at 7.9%. The ECB to revise down its inflation projection on Thursday, and our economists look for a 25bps cut by the April meeting. With hardly any easing priced in, some tactical EUR weakness may be likely, though for the most part EURUSD will take its cue from the Italy-German 10Y spread. The biggest surprise this week could come from the BoE on Thursday; our economists look for a further GBP 25bn in expansion in QE. With this not fully discounted (only half the economists in recent polls expect more easing this week), GBPUSD will likely break below 1.5000 this week.
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BNP Paribas