Daily Market Pulse

USD

The latest US Nonfarm payrolls (NFP) just missed expectations last Friday, with 236K new jobs added, against an expected increase of around 240K. However, the overall unemployment rate dipped slightly from 3.6 to 3.5%. Average hourly earnings also missed expectations, but only just. While the JOLTS and ADP data were weaker last week, the overall NFP report remains reasonably healthy and resilient. That fact was not lost on markets, with the latest expectations for a 25bps hike at the next Fed meeting subsequently rising from around 50 to 66%*. The dollar also found a modicum of support, with the dollar index (DXY) paring its recent decline into Friday’s holiday-thinned close. This week’s key US inflation data is likely to set the trend for the greenback.

*Source: CME group.

EUR

Although the single currency pared some of last week’s gains by the close on Friday, EUR/USD still managed to finish over 0.5% higher over the week. With much of Europe still on holiday, there has been a slow start to proceedings this week. However, the rest of this week is full of keynote European data, including Regional Retail Sales and Industrial Production and key Germain Inflation. Given their recent hawkish comments on future rate hikes, the ECB will pay close attention to the inflation data.

GBP

The UK growth data will likely dominate market attention this week. The latest estimates predict a slight decline over the past month, having risen unexpectedly. At the same time, industrial and manufacturing Production data is released. Having declined during January, there remains some optimism for a rebound. Regarding rebounds, GBP/USD remains close to the recent cycle high, having rallied by another 0.7% through last week. That represented the fifth straight week of advances for the resurgent pound.

JPY

Kazuo Ueda begins his tenure as the governor of the BoJ this week, beginning with a meeting with the Japanese prime minister earlier today. Ueda suggested that the two men discussed the need to guide policy flexibly, given economic uncertainty. However, he seems in no urgent rush to amend the YCC policy, even if yields on key JGBs have been rising of late. USD/JPY finished last week at roughly 0.7%, with Ueda’s comments this morning temporarily halting the decline. 

CAD

USD/CAD finished ever so slightly higher last week, despite the big jump in oil prices last Monday and a strong set of Canadian employment data. However, this week looks even more significant for the Loonie with the latest BoC meeting. Despite the recent improvements in key Canadian economic data, the BoC is expected to leave rates unchanged, which could weigh on the Loonie.  

MXN

Having rallied by 1% over the past week leading into the NFP report, USD/MXN then surrendered much of those gains by Friday’s close, with the pair rising by 0.4% overall. This has helped to give the Peso a particularly bullish outlook into this week, with further declines amongst USD/MXN highly likely. 

BRL

Last week, the Real had an exceptional time, rising by over 3.4% as USD/BRL declined to levels not witnessed since the end of January. Maintaining those gains can often be tricky, so Real bulls might enter the new week with some trepidation, despite such a solid technical outlook for the Real.