US DOLLAR OUTLOOK: BULLISH

• US Dollar could rise due to risk aversion from virus-induced recession scares.
• ISM, PMI, and nonfarm payrolls data may catalyze a surge in the Greenback.
• Will the US $2 trillion fiscal stimulus package be enough to restore risk appetite?

US DOLLAR EYEING NONFARM PAYROLLS, ISM, PMI DATA

The US Dollar may rise if manufacturing and services figures from ISM and Markit PMI reports highlight the impact of the coronavirus, and cause the highly-liquid Greenback to surge on the back of risk aversion. Nonfarm payrolls data for March will be particularly scrutinized with estimates of a -100 thousand print, which would mark the weakest reading since the 2008 financial crisis, if the report falls in line with expectations

US DOLLAR SURGING VS EURO, AUSTRALIAN DOLLAR, NEW ZEALAND DOLLAR, BRITISH POUND – DAILY CHART

US Dollar chart created using TradingView

The anticipated plunge comes as local governments order non-essential businesses to close their doors and force consumers to self-quarantine. Consequently, this has thrown over three million Americans out of work as shown by last week’s publication of initial jobless claims data. The magnitude of the virus-induced shock will become evident as data for March provides analysts and investors with a clearer picture of the impact.

Here is a breakdown of the key economic indicators that may elicit volatility in US-Dollar crosses:

A slew of consumer-related data will also be released, which may warrant the attention of traders given that over 80% of the US economy is driven by consumption. Consequently, monitoring indicators relating to the spending habits of the driving engine is imperative. Numerous housing statistics will also be published which may provide more insight into how consumers are feeling about the outlook.

US $2 TRILLION FISCAL STIMULUS PLAN: WILL IT REVIVE ECONOMIC ACTIVITY?

Last week, the US Dollar weakened against its G10 counterparts, after optimism about the passage of a $2 trillion fiscal package buoyed risk appetite and chipped away the appeal of holding havens like USD. It is possible that this same dynamic may play out in the week ahead and could, as a result, act as a counterbalance to the forces pushing the US Dollar higher.

Having said that, the lag between implementation and the actual effect of the stimulus will be delayed, and in the interim, markets may focus on more immediate concerns. This includes updates regarding the total number of those infected by the coronavirus, but also the release of key statistics – like those outlined above. Consequently, in the interim, the capacity for data-induced volatility may swell and push the US Dollar higher.