Top 10 Forex Events: April 1-5

Four monetary policy announcements by major central banks and the U.S. Nonfarm Payrolls and Employment Situation report will make for a busy start of the second quarter as traders continue to monitor the situation in Cyprus while waiting to find out if the European Central Bank will be able to restore confidence following a few tumultuous weeks in the euro area.

In preparation for the new trading week, here's the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. USD: U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Apr. 1, 10:00 am, ET.

Manufacturing growth in the U.S. is forecast to expand at a slower pace with an index reading of 54.1 in March from 54.2 in February.

2. AUD: Reserve Bank of Australia Interest Rate Announcement, Mon., Apr. 1, 11:30 pm, ET.

Contrary to the expectations of a rate cut, the Reserve Bank of Australia sat on the sidelines last month and could do the same in April as the Australian economy and labor market seem to be gaining traction. On the other hand, the Reserve Bank of Australia could warn about persistent currency strength and could still keep the door open to a 25 bps rate cut if the economy starts to lose momentum. The Australian dollar could attract more bids if the central bank shows no desire to cuts rates in upcoming months.

3. USD: U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., Apr. 3, 8:15 am, ET.

The U.S. private sector is forecast to register another month of stronger job creation with up to 216K jobs added in March, compared with 198K jobs in February.

4. USD: U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Wed., Apr. 3, 10:00 am, ET.

In line with the current trend of improvement, the U.S. services sector is forecast to expand further with a non-manufacturing index reading of 56.1 in March from 56.0 in February.

5. JPY: Bank of Japan Interest Rate Announcement, Thurs., Apr. 4, around 12:00 am, ET.

As the new Bank of Japan Governor Haruhiko Kuroda presides over his first monetary policy meeting, expectations are high that he might announce new bold measures to fight deflation and to help him achieve his goal of reaching the 2% inflation target in two years. Policy makers are likely to reiterate their commitment to aggressive monetary policy easing, continuing full speed ahead with their open-ended QE program until the 2% inflation target is in sight. However, if the Bank of Japan’s meeting does not deliver a “shock and awe” announcement, the yen could see a more significant price correction of its losses since last November.

6. EUR: Euro-zone Composite PMI (Purchasing Managers Index), a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Apr. 4, 4:00 am, ET.

The chronic contraction in the euro-zone manufacturing and services sectors is forecast to continue as the Composite PMI remains below the 50 boom/bust line for a twentieth consecutive month with a final reading of 46.5 in March, confirming the preliminary estimate. The euro could stay under pressure if the report fails to instill optimism that conditions in the euro-area are improving.

7. GBP: Bank of England Interest Rate Announcement, Thurs., Apr. 4, 7:00 am, ET.

Although in the last couple of months the Bank of England policy makers have shown that they are not in a hurry to do more QE, with the U.K. economy contracting in the final quarter of last year and possibly in Q1 2013, a triple-dip recession will increase the odds that the Bank of England would have to consider another expansion of its Asset Purchase Program, and possibly even a rate cut in upcoming months. The Monetary Policy Committee would probably prefer to sit on the sidelines and maintain the existing monetary policy at the April meeting until they see the first Q1 2013 GDP estimate, scheduled for release on April 25. The pound has found some bids as a euro alternative during the Cyprus debacle, but could come under pressure again if the market sees a Q1 contraction in the U.K. and begins to price expectations that the Bank of England might have no other choice but to ease monetary policy further.

8. EUR: European Central Bank Interest Rate Announcement, Thurs., Apr. 4, 7:45 am, ET.

The current economic reality in the euro-zone continues to spell recession with chronic contraction in the area’s manufacturing and services sectors. As if this is not bad enough, the bailout drama in Cyprus has created more uncertainty and a sense of distrust, while the euro-area’s third-largest economy Italy still remains without a government. As a result, the European Central Bank is faced with major challenges to find a way to help the economy grow and to calm the nerves of investors. The euro would be likely to head lower into the $1.20′s if the European Central Bank reduces the benchmark rate or hints of an impending rate cut in the near future.

9. EUR: Euro-zone Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Fri., Apr. 5, 5:00 am, ET.

As a sign of more doom and gloom in the region’s economy, consumer spending in the euro-area is forecast to drop by 0.3% m/m in February, compared with the 1.2% m/m increase in the previous month.

10. USD: U.S. Nonfarm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Apr. 5, 8:30 am, ET.

The consensus forecasts point to another month of decent job creation in line with the recent trend of improvement in the U.S. labor market. The U.S. economy is expected to add 190K jobs in March compared with 236K in February, while the unemployment rate stays unchanged at 7.7%. The USD could benefit from an upbeat NFP report on expectations that the Fed could take the first step toward monetary policy tightening sooner rather than later.