Daily Market Pulse

USD

This week’s incoming US data releases have raised concerns over the outlook for the world’s largest economy. Throughout this cycle of rate hikes, the US labor market has remained amazingly robust. However, there are growing concerns this may be about to change. Both the latest JOLTS and ADP reports have highlighted marked slowdowns. If tomorrow’s key nonfarm payroll data confirms this trend, expect markets to move ever closer to expecting a pause from the Fed at the May meeting. Current expectations are at around 60%*. The bad news has continued with a decline in the Services sector, according to the latest ISM Services PMI survey released yesterday. Both new orders and prices paid also dipped markedly. The dollar continues consolidating, with the dollar index (DXY) down by around 0.7% this week.  

EUR

It has been a reasonably solid week again among key European data releases. Throughout the region, PMI services readings remained mixed but crucially remained in expansionary territory. Spain and Italy beat expectations, with France, Germany, and Regional data missing. In Germany, there have been strong signs of recovery in Manufacturing. Industrial Production increased by a snappy 2% during February, beating estimates of a 0.1% gain. That follows a solid recent beat amongst Factory Orders. The single currency remains robust, with EUR/USD around 0.5% overall since Monday. 

GBP

The latest UK House Price data confirmed a surprising increase over the past month, rising by 0.8%. That follows from an unexpected 1.2% jump in the previous month, adding to broad-based beats among UK economic output. This has helped to back solid gains for the pound since the beginning of the year, with GBP/USD recently rising to a 10-month high. 

JPY

Recent Yen gains have continued throughout this week, with USD/JPY slipping by over 1% and EUR/JPY declining by a slightly less at 0.7%. Given the relative void among Japanese data this week, the Yen will likely take its cues from moves amongst key US Bonds. This is especially so given the lack of urgency for change of YCC policy amongst Japanese officials. Indeed, prime minister Kishida recently suggested that he is ‘not seeking any imminent change in monetary policy,’ which says as much given the pressure on the BoJ from the government recently. 

CAD

The recent surge in oil prices has consolidated over the past two days. This has led to a similar move for the Loonie, as USD/CAD pushes moderately higher. Today’s Canadian employment report will be meaningful. Markets expect a headline increase in employment of about 12K, after a 21.8K increase last time. Overall unemployment is expected to edge higher from 5 to 5.1%. However, given stronger Canadian data releases of late, markets will remain on edge. This is essential, as any further data beats could pressure the BoC to hike rates again. 

MXN

Has the rally for the Peso reached an end? Having rallied sharply over the past two weeks, USD/MXN has edged around 1.5% higher. However, the overall outlook for the greenback may still play a pivotal role in determining directional bias for the Peso, which of course, remains challenging and could lead to further declines in USD/MXN. 

BRL

Unlike the Peso, the Real has managed to remain pretty robust over the week, marginally rising by 0.15% overall. However, with volumes expected to decline over the next few days, as many market participants take a break over Easter, position squaring is likely to dominate overall directional bias.