The US economy continues on its path of recovery, with solid PMIs and nonfarm payroll reports. The US dollar is also showing strength, boosted by higher US Treasury yields. This week highlights rate decisions from the ECB and Bank of Canada and GDP reports in the eurozone and the UK.

Inflation was robust in the eurozone in February, with Germany at 0.7% and the eurozone at 0.9%. Final PMI reports for Germany and the eurozone indicated strong growth in manufacturing but pointed to contraction in the services sector. The German Manufacturing PMI was especially robust, with a reading of 60.7.

UK manufacturing remains a bright spot in the economy, as Manufacturing PMI rose to 55.1, up from 54.1. Construction PMI showed growth, with a reading of 53.3, up from 49.2. The services sector showed improvement but remained in contraction, with a reading of 49.5. The 50-level separates contraction from expansion.

In the US, ISM PMIs remained in expansion territory in February. Manufacturing PMI rose to 60.8, up from 58.7 beforehand. This marked its highest level since August 2018. Services PMI slowed to 55.3, down from 58.7. The week wrapped up with Nonfarm Employment Change, which shined with a reading of 397,000, crushing the estimate of 197,000. The unemployment rate edged lower to 6.2%, down from 6.3%.

1. Eurozone Revised GDP: Tuesday, 10:00. The second estimate for growth in Q4 of 2020 stands at -0.6%, which would confirm the initial estimate. The lack of economic growth can be attributed to the strict health restrictions due to Covid-19.
2. US inflation Report: Wednesday, 13:30. Inflation is expected to rise in the US in the coming months, as there is significant pent-up demand due to the Covid health restrictions. Headline CPI is expected to edge up from 0.3% to 0.4%, while Core CPI is projected to rise from 0.0% to 0.2%.
3. Bank of Canada Rate Decision: Wednesday, 15:00. The BoC is expected to maintain the Overnight Rate at 0.25%, where it has been pegged since March. A hawkish rate statement would be bullish for the Canadian dollar.
4. ECB Rate Decision: Thursday, 12:45. The ECB holds its annual monthly policy meeting against a backdrop of rising global bond yields. Investors will be keeping a close eye on the rate statement, looking for clues regarding future monetary policy.
5. German CPI: Friday, 7:00. Inflation showed a respectable gain of 0.8% in February and the second-estimate forecast is expected to come in at 0.7%.
6. British GDP: Friday, 7:00. The monthly GDP report showed a gain of 1.2% in December, rebounding from -2.6% beforehand. Will we see another gain in January?
7. Canada Employment Report: Friday, 13:30. Canada’s labor market has sagged lately, and the January release of -212,800 was a disaster. Unemployment rose to 9.4%, up sharply from 8.6%. We now await the February data.

• EUR/USD forecast – for everything related to the euro.
• USD/JPY forecast – projections for dollar/yen
• AUD/USD forecast – predictions for the Aussie dollar.
• USD/CAD forecast – Canadian dollar analysis
• Forex weekly forecast – Outlook for the major events of the week.