US economic data unlikely to impact dollar much

It is going to be a runaway success week ahead in the US. Series of data releasing is tempting players in various segments. It seems like the FOMC statement to likely convey that the committee views data in Q1 as an aberration and sees economic growth proceeding at a moderate pace. Indeed, data surprises since the March meeting have turned more positive. With back to back data releasing evens, such as Consumer confidence on Tuesday, advanced estimate of Q1 GDP on Wednesday, Chicago PMI on Thursday, ISM manufacturing on Friday heating the markets round the corner.

We are in sync with consensus on Q1 GDP 1% qoq SAAR, slightly above on ISM manufacturing 52.0 versus previous 51.0, slightly below consensus on consumer confidence 102.5 versus previous 103 and Chicago PMI 50.0 versus previous 51.0. On the employment market front, it will uphold the vision that an array of indicators explains that slack persist to reduce even as it accept the weakness in the March report. On the inflation front, it should note the stabilization of realized inflation and the widening in TIPS breakevens.

A more constructive Fed is likely to support the USD as well as weigh on risk appetite, in our view. Our rates strategists maintain the view on front to intermediate curve flatteners. Hence, it is expected that economic data to remain neutral for the USD and at present dollar looks stronger over Euro.

Volumes for forwards, swaps, options and non-deliverable forwards stood at $270 billion for in March up from the $241 billion reported in February for a 12% monthly change and 10% higher than March 2014's $245 billion. The data from Thomson Reuters also showed average spot daily volumes in March rose to $132 billion, from $114 billion in February, for a 15.8% monthly increase, and a tad higher than March 2014's $126 billion for a 4.7% yoy bump. In diagram, it shows the increased volume growth from previous months this is accounted mainly owing to the uncertained Asian markets and volatility in Euro zone.