03.03.2017 Daily Market Analysis

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The US dollar (USD) continued its bullish momentum as it posted massive gains against all the major currencies on Thursday. With fundamentals going its way and more Fed speak coming today, the greenback may continue to pile even more pressure on the major currencies.

The USD was the highlight of the day, surging higher and higher as investors become more convinced of multiple rate hikes this year, with the first of them expected as early as this month. There was even more upbeat data as Unemployment claims came in at 223K, much lower than the expected 243K, and marked the lowest figures ever printed in 44 years. In fact, it is this strong labor market that inspires the Fed’s resolves to increase rates as soon as possible. US yield rates also rose as the Fed funds rate now prices a near 90% chance of a rate hike this March, the highest level yet. It will be another eventful day for the world’s reserve currency as the US releases ISM Non-Manufacturing PMI data and Fed Chair Yellen crosses the wires. Aside from Yellen, there will also be speeches from FOMC members Evans, Powell and Fischer that investors will be keen on.

Meanwhile, the euro (EUR) continued its slide against the USD, despite upbeat data coming out of the Eurozone. The year on year Eurozone CPI Flash Estimate came in at 2.0%, better than the expected 1.8%. Spanish Unemployment Change improved to -9.4K, better than the expected 5.2K, while the Italian Monthly Unemployment Rate also printed 11.9%, better than the expected 12.0%. Today, traders will watch out for German Retail figures as well as Services PMI data releases from across the Eurozone.

In other currency news, the British pound (GBP) showed resilience against the USD but ended the day with marginal losses. UK released Construction PMI data which came out largely as expected at 52.5. There is ongoing uncertainty over the Brexit process, which is currently stalling because of the EU migrants’ issue. Investors can expect more direction today as UK releases Services PMI data.

All commodity currencies succumbed to the strength of the USD, closing the day with massive losses. The Australian dollar (AUD) led the tumble as the country’s Trade Balance printed 1.30B, worse than the expected 3.82B. The figures confirmed to the Reserve Bank of Australia (RBA) their worst fears - that a strong currency is not ideal for an exporting country. The New Zealand dollar (NZD) also fell, following the cue provided by its sister currency, the AUD. Also, Canadian month on month GDP came in as expected at 0.3%, but falling crude oil prices weighed down on the Canadian dollar (CAD). There is no major market moving data set to be released from the commodity countries, with their respective currencies expected to take their cue from the action-packed USD.