G10 FX Week Ahead: All Quiet On The Western Front


U.S. dollar banknote with map

A quieter week for US data and the Fed in blackout period could favor a continuation of benign market trends and a slightly weaker USD. EUR/USD can edge above 1.20 as the ECB tries to avoid rocking markets at its meeting on Thursday, while the BoC tapering may match consensus. Elsewhere, Biden's climate summit may drive different paths for the commodity bloc.

USD: Biden’s climate summit is the highlight



Week ahead bias Range next week 1 month target



Mildly Bearish 91.3000 - 92.0000 91.0000
  • The softening in US Treasury yields has been the big surprise and has pulled some of the tailwinds away from the dollar. Our team still favours higher US yields later in the quarter, but there seems no clear catalyst in the week ahead to drive US yields higher. On the data side, the only US numbers of note will come from the housing market in terms of existing and new home sales. And we are also entering the blackout period ahead of the April 28th FOMC meeting – meaning no Fed speakers. With US money market rates on the floor as US bank reserves held at the Fed approach US$4trn, and Treasuries seemingly less of a threat to risk assets, we favour a gently lower dollar this coming week.
  • A quiet week will also allow greater focus on Joe Biden’s virtual climate summit with world leaders. This takes place on Thursday. In advance, there is speculation that the US could announce more aggressive Greenhouse Gas emission reductions. We’ve yet to see energy transition directly play out in FX markets yet, but could this be the week that a big US announcement really hits the fossil fuel exporters and benefits those more exposed to the copper/aluminium story – the latter playing key roles in electric vehicles/solar and wind?

EUR: ECB will try to keep its head down this week



Week ahead bias Range next week 1 month target



Mildly Bullish 1.1880 - 1.2100 1.2000
  • April has so far been a good month for EUR/USD – despite Europe still struggling with third Covid waves. It seems investors are being very forward-looking and using the recent inflection higher in European vaccination rates to draw confidence in a European recovery later in the quarter. The highlight for the EUR this week will be Thursday’s ECB team meeting. Here our team sees the ECB doing its best to avoid being dragged into explaining its reaction function in Eurozone debt markets. And with little downside seen for European rates, one could argue that the EUR downside is limited too.    
  • The highlight of the data calendar will be a first look at the April PMIs and consumer confidence. Despite the lockdowns, activity levels appear to be rising and further improvement in both the manufacturing and service sector surveys should support the 2Q European recovery story. One slight word of caution here – let’s see whether recent chip shortages show up in manufacturing confidence. The auto sector has been hit badly here.

JPY: Still looking at the Treasury conundrum

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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