Sterling
A lack of notable data from the UK yesterday left the Pound on bearish form, with investors remaining focussed on Philip Hammond’s rather disappointing Spring Budget. The Chancellor may not have dwelt on the cost of Brexit, but markets certainly were. The issue of how much the UK will have to pay the EU once Brexit is complete continues to make investors and politicians jittery; many think it will be in the region of £60 billion in total to cover financial commitments Britain has already made. The fact there were just a few days left to the triggering of Article 50 was making this seem a more pressing issue than previously.
The National Institute for Economic and Social Research (NIESR) will release its GDP estimate for the three months to February this afternoon.
Euro
European Central Bank (ECB) President Mario Draghi threw markets a curveball yesterday, sending the Euro on a bullish recovery after the latest monetary policy meeting. The Governing Council provided little in the way of surprises, leaving monetary policy frozen again. However, Draghi drew reporters’ attention to the fact that the reference to the ECB using all available instruments to achieve mandated inflation targets had been removed from the latest statement. He told markets the ‘sense of urgency’ was gone which, along with upwards revisions to growth and inflation forecasts, buoyed the Euro higher. Draghi also dodged answering a question about whether interest rates could be raised before the quantitative easing programme is finished; an interesting move, considering he has previously flatly denied that it would happen.
US Dollar
There was nothing in the latest US jobless claims figures that could knock the massive odds of a rate hike taking place next week. Markets were still pricing in an 88.6% chance of monetary tightening and a slightly worse-than-forecast rate of initial jobless claims last week wasn’t enough to unsettle the markets. At 243,000, claims were still way below the 300,000 mark that signals something unhealthy in the labour market. Demand for the Euro curbed appetite for the US Dollar, but the ‘Greenback’ was still supported against the majority of its peers.
Janet Yellen has already stated that inflation and labour market strength are both vital if the Fed is to hike rates next month. With this in mind, today’s non-farm payrolls report will be even more influential than usual.
Canadian Dollar
The Canadian Dollar recorded some minor losses yesterday, but was able to make gains against its commodity peers. Even taking into account the weakness, the ‘Loonie’ was performing well considering the fact crude oil dropped to a 13-week low of below US$50 per barrel. This was thanks to Wednesday’s US oil inventories figures, which climbed by 8.2 million barrels last week; more than fourfold what was forecast. However, while buffeted by the weakening market sentiment, the ‘Loonie’ also found some support from news the government was set to announce a fund to support small businesses and make it easier for skilled immigrants to get work permits.
Canada releases unemployment and net change in employment data for February today.
Australian Dollar
The Australian Dollar slumped yesterday after inflation data from China both performed poorly and printed too strongly. Overall, year-on-year price growth slowed dramatically, dropping from 2.5% to 0.8% against forecasts of 1.7%. This was mostly on account of a sharp slump in food prices, however, with mineral and manufacturing costs showing another strong acceleration. This had the markets worried; the pace of growth seen thus far in the first quarter is unlikely to be sustainable, so many traders were selling out of the ‘Aussie’ on the fear the good times were coming to an end.
New Zealand Dollar
An empty data calendar left the New Zealand Dollar vulnerable to global market sentiment yesterday. The ‘Kiwi’ unsurprisingly followed the Australian Dollar lower after the release of the Chinese inflation data.
Data Released
13:30 CAD Unemployment Rate (FEB) 6.8%
13:30 CAD Net Change in Employment (FEB) 2.5k
13:30 USD Change in Non-farm Payrolls (FEB) 190k
13:30 USD Unemployment Rate (FEB) 4.7%
15:00 GBP NIESR Gross Domestic Product Estimate (FEB) 0.6%