Weekend: Dollar Weakens Following Weak NFPs; China, US CPI in Focus 

Weekend Developments

• US March non-farm payrolls add 120k jobs, expected 205k
• Chinese CPI will be reported later today, US CPI on Friday
• Iran to meet major powers for nuclear talks on April 14th

Although foreign exchange markets reacted to Friday’s weaker than expected NFP data for March, the equity market’s close for Good Friday could result in further cross-market reactions for today’s session. With Federal Reserve Chairman Ben Bernanke’s statement two weeks ago citing the still-weak employment market as one of the main reasons that the central bank will keep pursuing a lax monetary policy, many investors are now eyeing the weaker data as possibly opening the door to another round of asset purchases. Even though some members of the FOMC have stated there will be no more large scale purchases unless the economy significantly weakens, the Federal Reserve may be more pressed to keep easing to prevent stepping on the recovery.

Market reactions and central bank commentary may be subdued until the end of the week as US March CPI will be reported on Friday. Headline CPI is expected to slow to 2.6% from 2.9% from the recent weakening in energy prices, while core CPI is expected to remain at 2.2%. Preliminary University of Michigan consumer confidence for April will also be reported on Friday, expected to improve to 76.6 from 76.2.

The Asian market is expected to be volatile throughout the week, with Chinese CPI and PPI on tap later today, Bank of Japan’s rate decision on April 10th, March Australian labor data on April 12th, and first quarter Chinese GDP to highlight Friday’s Asian docket.

At the time of writing, the yen is leading European currencies against the dollar post-NFPs. The Australian and New Zealand dollars are moderately weaker as markets await Chinese data.

--By David Liu, DailyFX Research