The first quarter of 2022 proved to be extremely volatile and filled with important economic and political events, which led to the fall of stock markets, rise in prices for crude oil and other commodities, contributed to the massive sell-off in the US Treasury market and, surprisingly, to a modest increase in USD.
Today, with the start of the new quarter, the market's attention will be focused on the large number of statistics from both Europe and the US.
In Europe, there will be a report on consumer inflation, which, according to forecasts, will jump from 5.9% to 6.6%. If that happens, the ECB will be forced to raise interest rates during its meeting in April, which could ultimately lead the region into recession. But in general, the problems may already worsen because of the geopolitical conflict in Ukraine.
Data on business activity in Germany, Eurozone, UK and the United States will also attract attention. Any decrease in the indicators will prompt a dip in stock indices and increase in demand for safe assets such as dollar, government bonds, gold, yen and franc.
But of all statistics, the most important one is the US employment data for the month of March. It is assumed that the US economy received 490,000 new non-farm payrolls last month, against an increase of 678,000 in February. As such, the unemployment rate is expected to decrease from 3.8% to 3.7% .
If the real data turn out to be no worse than the forecast, dollar will gain. However, it will be short-lived because in order to see stable growth, further actions by the Fed to raise interest rates are needed.
To curb the persistently high inflation, the cost of borrowing should increase not by 0.25%, but by 0.50% immediately. However, that could lead to recession, which the Fed fears.
Forecasts for today:
GBP/USD is trading above 1.3100 in anticipation of the March data on US unemployment, as well as the index of business activity in the UK. Good news from the US and weak readings from the UK could lead to a slide towards 1.2995.
Spot gold may also come under pressure amid strong data on new jobs in the US. A decrease below 1927.80 could lead to a slump to 1896.00.
