Forex Weekly Outlook March 5-9

The uncertainty in the U.S. continued to weigh on U.S. economic outlook after President Trump announced that the import tariffs on steel and aluminum will be increased to 25 percent and 10 percent respectively. This led to weak U.S dollar as investors abandoned the currency despite strong economic fundamentals.

In the U.K., manufacturing activities grew at an 8-month low in February while construction activities expanded slightly in the month. Signaling a mixed economic data, especially with the uncertainty surrounding Brexit plan following Prime Minister Theresa May’s speech on Friday.

Therefore, a strong services PMI number is needed to better assess U.K. economic position ahead of European Union response to Theresa May’s plan.

In Canada, the economy expanded at a slower pace in the second half of 2017, growing at an annualized rate of 1.7 percent in the fourth quarter. Suggesting that rising household debt has started weighing on consumer spending and likely to worsen economic outlook ahead of NAFTA trade deal with the U.S. Meaning, not just the correlation between the U.S. and Canada’s economy will weigh on Canadian dollar despite strong global commodity outlook but weak trade relation, low inflation, rising debt and overpriced housing market amid new tariffs on imports will hurt the loonie attractiveness, as Canada exports 90 percent of its steel to the U.S., representing 16 percent of the total U.S. steel imports, and also accounts for about 41 percent of America’s aluminum imports.

In Japan, the Governor of the Bank of Japan Haruhiko Kuroda for the first time announced the apex bank may start looking into balance sheet normalization as early as April 2019. This, bolstered Yen’s outlook across the board as investors jumped on it to avert the U.S and Europe’s uncertainties.

This week, USDJPY, CADJPY, NZDJPY, AUDJPY, and GBPJPY top my list.

CADJPY

The uncertainty surrounding the Canadian economic outlook ahead of NAFTA trade agreement and possible tariffs increment is likely to hurt the Canadian currency against the more attractive Japanese Yen in the first half of 2018, especially now that investors are likely to be looking for a weaker currency to trade the Yen against.