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Currencies, the Central Banks to Set the Tone this Week

DXY, EUR/USD. GBP/USD. USD/CHF, EUR/CHF, USD/JPY, AUD/USD, USD/CAD,

The heavy calendar of central-bank meetings this week will give currency traders clues about whether weak global growth will lead to easier monetary policy in the developed world.

Officials in Europe, the UK, Australia, Canada and Japan will hold separate meetings, and while expectations for significant new policy announcements are somewhat mixed, investors will pay close attention to comments from top central bankers for signs that they will take actions later in the year.
It will be all about reading the messages from central banks this week

With economic indicators from Europe to Japan remaining sluggish, analysts say central bankers will likely lay the groundwork to announce new efforts to lower interest in the near term. If a central banker surprises by being neutral, their currency is going to appreciate.
The line up of meetings will be the 1st since policy makers met last month at the G-20 summit of leading industrialized and developing countries, where they agreed to avoid explicitly targeting weaker exchange rates, which could help make their exports more competitive. That will increase the focus on how authorities discuss their exchange rates this week.

Concerns earlier this year that developed countries were creating a “currency war”, where monetary authorities push down their exchange rates to try to gain a competitive advantage, have dissipated recently.

In part that reflects the strengthening USD, which relieved pressure on other currencies.

The WS-J Dollar Index, which tracks the value of the USD against a basket of currencies, has risen more than 3.3% over the past month, on rising expectations that the US economy will continue to strengthen this year.

In the US, the non-farm payrolls report expected Friday should provide a Key indication of the pace of economic growth, and traders will look to see if the job market is improving quickly enough for the US Federal Reserve to wind down its bond-buying program sooner than expected.
Capital Economics expects the report to show that payrolls increased 175,000 last month, with the unemployment rate holding steady at 7.9%.

If the jobs figure miss expectations, it might lead to volatile trading in currencies, given widespread uncertainty in the market about when the Fed will start to reign in its bond-buying program.

Canada will also report on February employment Friday.

In Europe, investors will keep an eye on developments in Italy to see if the newly elected parliament will manage to form a new government.

Markets may also react to a report Wednesday on the breakdown of eurrzone’s Q-4growth, which is expected to confirm that the economy contracted. A report on German industrial production follows Friday.