Weekly currency news: Dollar, flat on mixed employment data
The major currency crosses remained trading within previous ranges last week, with the investors awaiting February’s U.S. non-farm payrolls figures and passed largely unnoticed in the currency markets.
U.S. employment increased at its fastest pace in 1, 1/2 years, with 313,000 new jobs created, but average hourly wages showed a mere 0.1% acceleration, down from the 0.3% gain in the previous month, which cooled off market expectations that steady wage inflation trends might push Federal Reserve to consider four rate hikes -instead of the three, programmed- in 2018.
Earlier during the week, Central Bank monetary policy decisions failed to provide any fresh impulse to the currencies. The BoJ Governor Kuroda showed a cautious stance defending the need for monetary stimulus, while ECB’s Draghi reserved the right to extend bond purchases beyond September 2018, which has a negative impact on the euro.
This week we will have a relatively thin calendar, with the most relevant events bbeing the Consumer Prices Indexes in the U.S. and the Eurozone, the UK annual budget report and the monetary policy decision by the Swiss National Bank.
Currencies last week
- EUR/USD: recovery, capped below 1.2400
- GBP/USD fails to return above 1.3900 and returns to 1.3800
- EUR/GBP rally stalls above 0.8900
- USD/JPY trims losses and approaches 107.00
Main events this week:
In the U.S. calendar, on Tuesday the Consumer Prices Index is expected to show over-target inflation for the third consecutive month, indicating firm inflationary pressures, which might add Fed to hike interest rates, and might have a positive impact on the U.S. dollar.
On Wednesday, we will be attentive to the U.S. retail sales figures. Consumption is a major contributor to U.S. GDP, and is expected to have bounced up in February, which might help the dollar to resume its recovery.
On Friday, the U.S. housing starts and building permits will reveal the health of the construction sector. Home construction surprised in January, rising to a one year, while building permits reached their highest levels in 10 years. Another good reading in February might confirm a trend which would be positive for the dollar.
In the Eurozone calendar the most relevant event will be the final reading of February’s Consumer Prices Index, which is expected to confirm that inflation grew at a 1.2% annual pace, well below the ECB target rate. We do not expect this indicator to have a relevant impact on the euro.
In the UK calendar, the most interesting event will be spring Budget Statement, where the chancellor, Philip Hammond will present the economic forecasts and the status of the country’s finances before the Office for Budget Responsibility. Although the event is not expected to have the same weigh of that of November, Hammond’s comments about the Brexit bill might have some impact on the pound
In the Japanese calendar, on Tuesday, the Bank of Japan will release the minutes of its latest monetary policy minutes, which will be observed with interest for hints about the bank’s plans to taper its massive monetary stimulus measures. The comments of the BoJ officials might have some impact on yen volatility
On Thursday, the Swiss National Bank will release its monetary policy decision. With inflation at very low levels, the bank is not expected to hike rates in the foreseeable future, thus the impact of this event in the CHF is likely to be neutral to negative.