13.03.2017 Daily Market Analysis

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On Friday last week, profit taking capped the US dollar (USD) gains as the strong Nonfarm payrolls data all but confirmed a rate hike this week.

Friday’s NFP report impressed, with Employment Change printing 235K, higher than both the expected 200K and the previous 227K, while the Unemployment Rate printed 4.7%, an improvement from the previous 4.8%. There was only the month on month Average Hourly Earnings that gave investors an excuse to unwind their positions after showing a growth of 0.2%, same as the previous month, but slightly softer than the expected 0.3%. The markets had already priced in a 100% chance of a rate hike this week, and this was the major cause for Friday’s muted performance. The FOMC rate decision will be the main focus in the economic calendar this week, but traders will also focus on important macroeconomic data, such as Retail sales numbers, Consumer Spending figures as well as Manufacturing data.

Meanwhile, the euro (EUR) ended Friday unchanged as the USD failed to spark any volatility, following the impressive NFP data. But it could be an important week for the common currency. European Central Bank’s President Draghi will be crossing the wires today as he delivers a speech in Frankfurt. Last week, the bank acknowledged that the Eurozone’s economic growth is on the right trajectory, and as a result, they boosted inflation and GDP growth for 2017, 2018 and 2019. If Draghi is less dovish today, he will set the tone for the common currency this week, ahead of the US FOMC rate decision.

In other news, the British pound (GBP) is another major currency which is set for an explosive week. This week, the Bank of England will release its latest monetary policy decision; UK unemployment numbers are also on tap, while Article 50 may finally be triggered by Prime Minister Theresa May. No one expected a smooth and straightforward Brexit process, but if Article 50 is triggered this week, investors may pile pressure on the Queen’s currency. Things may even be worse if the Bank of England (BOE) remains cautious and delivers a neutral to dovish stance.

All commodity currencies also ended Friday unchanged against the USD, after they were pressured the whole of last week. The Canadian dollar (CAD) failed to take advantage of upbeat Employment numbers to edge higher against the USD, but a mute calendar suppressed both the Australian dollar (AUD) and New Zealand dollar (NZD). Chinese Industrial data will be released today, and may provide the cue for the AUD and NZD. Aside from that, there is no major macroeconomic data expected from the commodity currencies, and with important events lined up elsewhere, the commodity currencies are set to take their cue from the price action of the major currencies.