Seatbelts on

Theoretical disappointment

A recurrent paradox in financial markets is that, from time to time, investors expect economic data to be better (or worse) than expected. It frustrated the dollar on Friday when US nonfarm payrolls came in a net 54k more than forecast: they weren't more enough.

Analysts had predicted nonfarm payrolls to have increased by 190k in February. The Bureau of Labor Statistics said they went up by 235k and revisions to December and January added a further 9k jobs. The net figure was 54k more than "expected". But Wednesday's strong employment change figure from ADP, a big personnel and payrolls service provider, had led investors to expect an even higher number.

Because of this there was a negative reaction to what were, in all fairness, good numbers. The dollar lost an immediate third of a cent to the euro and starts this morning a cent lower on the day against the common currency.

Story or rumour?

Although the outliers on Friday were the stronger South African rand and the weaker Norwegian krone the main battle was between the soft US dollar and the firm euro. The euro strengthened by one US cent on a story about higher interest rates from the European Central Bank.

"Sources told Reuters that some ECB policymakers had raised the possibility of a rate hike before the end of QE", said Reuters. It wasn't much but it was enough to send the pound four fifths of a euro cent lower. Not that the pound needed exogenous hindrance: UK output data on Friday morning had shown industrial production falling by -0.4% in January while manufacturing production was down by -0.9%.

Friday's other big-ticket data came from Canada, where 15k new jobs were created in February taking unemployment down to 6.6%. Because they beat expectations the Loonie added a third of a US cent and went up by a third of a cent against sterling.

There may be trouble ahead

Although there are no ecostats to speak of today, the coming week brings a raft of potentially earth-shaking events and decisions. Wednesday will be a big day with the Dutch election, the FOMC rate hike and, probably, the US budget outline and a vote on the debt ceiling.

From a market point of view the US budget is arguably the most important of those. What Mr Trump wants and what Congress allows him to have are not necessarily the same thing, even though the administration and both houses carry the Republican banner. The (tea) party is not renowned for its support of borrow-and-spend policies. Moreover, the debt ceiling, which caps US government borrowing, will come back into play on Wednesday unless Congress votes to lift or suspend it again.

Slightly further down the road, G20 finance ministers and central bankers will meet on Friday in Baden-Baden to discuss, inter alia, trade. The draft communiqué apparently no longer pledges to "refrain from protectionism".