10.03.2017 Daily Market Analysis

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The US dollar (USD) posted a mixed performance yesterday, but ahead of the release of the Nonfarm payrolls data, investors are expecting another leg of bullish momentum.

US Unemployment claims came in as expected at 243K, while month on month Import prices printed 0.2%, higher than the expected 0.1%. The US Fed Fund Futures are pricing a 100% chance of a rate hike next week, but the greenback’s soft performance yesterday showed that there is still the NFP report on investors’ mind. Overall, a positive number is on the cards, after expectations improved from 175K to 200K yesterday. And there is plenty of reason to expect a strong jobs growth figure: ADP NFP estimates printed their highest number in recent months, Consumer Confidence hit its highest level in 16 years and the 4-week average of Unemployment claims dropped from 248K to 236K. A positive number should all but confirm a rate hike, and there is no doubt that USD bulls will be inspired.

Away from the USD, the euro (EUR) was the best performing currency yesterday, printing gains across the board as the ECB delivered a less dovish stance than expected. The central bank kept its Minimum Bid Rate unchanged at 0.00%, but noted that the Eurozone’s economy and inflation are growing. It raised GDP forecasts for 2017 and 2018 by 0.1%, and boosted the inflation forecast for 2017 from 1.3% to 1.7%. Investors had largely expected this, but hoped that President Draghi would continue to talk down the common currency. Instead, Draghi said that the economic risks they have long feared have since become less pronounced and the current economic expansion is firm and balanced. The euro is now well supported and may extend gains against major currencies, bar the USD, where a US rate hike is the game changer.

Unlike the euro, the British pound (GBP) witnessed a muted performance, ending the day unchanged against the USD. The pound has been the subject of heavy selling in recent days, and it was due for a pause ahead of US NFP report and next week’s trigger of Article 50. Today, GBP traders will watch out for the release of month on month Manufacturing Production numbers as well as Goods Trade Balance.

All commodity currencies drifted lower against the USD. The Canadian dollar (CAD) led the losses as the Capacity Utilization Rate printed 82.2%, weaker than the expected 82.6%, and the month on month New Housing Price Index came in as expected at 0.1%. Canada will release Employment data today, and an upbeat number would give the loonie a reprieve. There is no major data from both Australia and New Zealand, but falling commodity prices are expected to continue piling pressure on both the Aussie and Kiwi.