In the upcoming session, economic data from Japan comes into the spotlight. The Japanese Yen has been trading higher against the greenback since the Bank of Japan declined to implement further easing measures last week. Investors were disappointed with the lack of fresh policy initiatives to stimulate the economy and subsequently devalue the currency, which in turn drove USDJPY further away from the 100.00 mark. As the quantitative monetary easing helps stabilize financial market conditions and increases public investment, the BOJ has raised its forecast for economic growth to 2.9 percent this year from 2.3 percent initially reported. Coming up, the docket will carry Japanese data that reflects on employment, consumer spending and industrial production – all important measures for counter-currency strength and general market stability.
On the US front, top event risk in the coming session comes from the April Consumer Confidence report from the Conference Board. This indicator will offer a direct look into how the American consumer – whose consumption accounts for approximately 70 percent of US GDP – is weathering the persistently high level of national unemployment. The data itself is certainly worth short-term volatility, but momentum is unlikely to derive from the data given the preoccupation the market will have with the Federal Open Market Committee (FOMC) scheduled for the following day.
Taking stock of the event risk of the past 24 hours and what influence it will have over policy moving forward - the US docket has offered an uneven pace of recovery. Housing sector and domestic consumption figures this past session offer little direct evidence for the policy group to decide definitively that Quantitative Easing can either be wound down or accelerated.
In the interim European session, traders will want to keep an eye on German and Eurozone March unemployment reports to guidance short-term moves EURUSD – the most liquid cross in the FX market. This data can play into another of the week’s most influential of event risks: the ECB rate decision. Speculation of a rate cut has climbed significantly within the economists’ circles, but market participations have yet to catch the same level of conviction. This could significantly alter the relative strength between the market’s two most actively traded reserve currencies and thereby is a must watch event for any dollar trader.