07.03.2017 Daily Market Analysis

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It was a quiet start to the week on Monday, but the US dollar (USD) signaled its intentions by edging higher against all the major currencies.

There was more Federal Reserve talk as FOMC member Kashkari maintained the consistent hawkish tone we have become accustomed to from other policymakers. Month on month US Factory orders came in as expected at 1.2%, while treasury yields ticked higher. Yesterday, the Fed future funds rates priced in 96% of a rate hike this year, up from about only 40% less than a week ago. The focus will now be on the labor market, with nonfarm payrolls on tap later this week. With no major data released until then, sentiment may be the driver in the markets.

Meanwhile, the euro (EUR) drifted lower against the USD on Monday, with investors now looking forward to this week’s ECB press conference. But political concerns came out afresh as French candidate Alain Juppe pulled out of the presidential race. Juppe remained the only candidate with a realistic chance of snatching some of anti-EU Le Pen’s support. Investors are now worried that Le Pen may eke out an unlikely victory - something that would be a damnation to the euro currency.

In other currency news, the British pound (GBP) resumed its tumble, but there is no major market moving data expected out of UK today. The Brexit remains a concern for the pound, but Article 50 is expected to be triggered in less than 2 weeks’ time. The House of Lords gave the UK Government some slight setback after guaranteeing the rights of EU migrants, and now the ball is in the court of the House of Commons. No matter their decision, Prime Minister Theresa May will most likely go ahead with triggering Article 50.

All commodity currencies were pressured lower by the greenback, with the Australian dollar (AUD) providing the cue. The Reserve bank of Australia (RBA) kept interest rates unchanged, but delivered yet another neutral stance that did not inspire investors. The RBA noted that the domestic economy is improving and sentiment-based indicators are also printing positive numbers, but there was a caveat: the RBA continued its rhetoric that an appreciating Aussie would ‘complicate’ matters. Meanwhile, both the Canadian dollar (CAD) and New Zealand dollar (NZD) also drifted lower against the stronger USD, but there will be data to look forward to today. Canada will release Trade Balance figures, while New Zealand will release the latest Global Dairy Trade auction prices. These macroeconomic indicators may carry more significance today, with no major US data available on the economic calendar.