09.03.2017 Daily Market Analysis

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The US dollar (USD) extended gains against all the major currencies on Wednesday, as upbeat data inspired the greenback bulls.

ADP reported Nonfarm Employment Change of 298K, significantly higher than the forecast of 187K, as well as the previous 261K. Quarter on quarter Revised Nonfarm Productivity also printed 1.3%, better than the expected 1.5%. The latest Crude Oil Inventories report also showed a build of 8.2M, much higher than the expected 1.1M. Investors were expecting a soft labor report, but they will now eagerly await Friday’s NFP data. The only danger to the current USD bullish momentum it that the Fed Futures Fund now prices in a 100% chance of a rate hike this month. A retracement might be on the cards, but a solid report should fuel at least one more leg of bullish price extension.

Meanwhile, the euro (EUR) tumbled against the USD yesterday, but it will be the focus currency today as the European Central Bank releases its Minimum Bid Rate and holds a Press Conference later on. Rates are expected to remain unchanged at 0.00%, but a dovish ECB stance is expected at the press conference. The weak euro is boosting economic activity in Eurozone, and the ECB will want to keep it that way. They may recognize the growing economy and even deliver upgraded forecasts, but they will surely not want to talk up the common currency. All in all, there will be much volatility throughout the day for the euro.

In other currency news, the British pound (GBP) extended its decline yesterday as the UK released its Annual Spring Budget. The GDP forecast for 2017 was upgraded to 1.7%, up from 1.4%; but estimates for 2018, 2019 and 2020 were revised lower. Brexit planning will be done this year, and the revisions for the succeeding years show that this is when the Government expects the economy to feel the pain. The Government also announced plans to cut on borrowing over the next 4 years as well as set up a fund to help boost the economy in case a slowdown is sparked by the Brexit. With Article 50 set to be triggered next week, we expect the Queen’s currency to be pressured lower.

As a basket, the commodity currencies were the biggest losers against the USD yesterday. There was no major data from both New Zealand and Australia, with negative sentiment around the NZD and AUD inspired by the Chinese Trade Balance deficit. On the contrary, Canada released upbeat data but the USD strength pressured it lower. Month on month Building Permits printed 5.4%, higher than the expected 3.1%, while Housing Starts came in at 210K, higher than the expected 205K. With US crude oil stockpiles showing a strong build, oil prices tumbled on supply concerns and provided the cue for the loonie.