USD Soft Heading into Week

UK Markets Closed for Early May Bank Holiday
At 1:00 AM March BoJ Meeting Minutes
At 1:45 AM Swiss April Unemployment Rate (exp 2.8%, prev 2.9%)
At 6:00 AM Germany March Industrial Orders m/m (exp –0.5%, prev 3.9%)
At 8:30 AM Canada March Building Permits (exp 6.7%, prev –22.4%)
At 3:00 PM US March Consumer Credit (exp $4.5bln, prev $2.97bln)

The dollar continues to trade on weaker footing against the majors, still reeling from Friday’s disappointing labor report. The April non-farm payrolls figure grew at its slowest pace in over two years, expanding by 88k and falling short of estimates for 100k jobs growth. The US economy continues to reveal signs of slowing, with housing and manufacturing slumping and jobs growth seemingly at the onset of further deterioration. As mentioned previously, any dollar rebound is deemed to be temporary position squaring and an opportunity to sell the currency.

Central Bank monetary policy decisions will be the key highlight in the coming week, with the FOMC, BoE and ECB deliberating policy. Among the central banks, only the Bank of England is forecasted to change rates – with consensus estimates calling for a 25-bp rate hike to 5.5%. There is also scope for the BoE to preempt additional inflationary pressure in the UK with a surprise 50-bp rate hike to 5.75%. Such a move will see the sterling quickly race toward 2.100 against the dollar. Meanwhile, the FOMC announces its decision on Tuesday and is largely expected to remain unchanged from its previous meeting in both decision and statement. The ECB is also expected to leave policy unchanged at 3.75%, but Bank President Trichet is likely to signal a hike in June in his subsequent press conference. Trichet will likely use the word vigilance in describing the Bank’s stance against inflation.