Friday March 10th, 2023

The US$ holds steady, oil prices slip, equity markets are down and US yields ease heading into US Jobs report. Currency and commodity markets consolidate heading into the US Nonfarm Payroll report which is expected to show 205k new jobs created in February, the jobs data is seen as key guidance for future Fed rate direction. Global equity markets are under pressure as the events around SVB highlighted some increased risk of financial stress to the economy the more the Fed raises interest rates. In focus today, US NFP, US Unemployment Rate, CAD unemployment Rate, Net Change in Employment and ECB’s President Lagarde speech for intraday direction.

In other news. Silicon Valley Bank’s (SVB) struggles spell further trouble for beleaguered tech startup market (CNBC). European & Asian stocks rattled after sell-off in US Bank Shares (FT). The UK economy rebounds with stronger than expected GDP in January. German inflation holds steady at 9.3%. Delegates are set to approve China’s Xi to an unprecedented third term as president. EU planes joint navy patrols to combat Russian threat to infrastructure after the attack on Nord Stream pipeline highlighted security concerns. President Biden announces 2024 budget with 25% minimum tax on richest Americans cutting the deficit by $3Tln over the next decade.

In Currency markets. The US$ holds steady near 3-month highs heading into the highly anticipated US NFP report. JPY eases as the Japanese central bank keeps to its super-easy economic stimulus. Markets remain vulnerable to increased volatility if the NFP employment number is outside expectations. CNY up 0.15%, while Asian currencies are down 0.2% on average vs US$. Trading currencies are mixed with JPY down 0.5%, NOK slips 0.25%, while AUD, SEK & MXN flat, NZD is up 0.15%, CHF firms 0.3% and ZAR rallies 0.85% vs US$.

Oil prices remain under pressure and are set for a 5% weekly drop, its biggest weekly loss in 5-weeks on worries about the prospect of further US rate hikes. C$ remains under selling pressure testing near 5-month lows on the prospect of the increasing interest rate divergence between the US & Canada. The prospect of higher US rates is expected to negatively impact commodity prices, drive investors to the higher rate US$ and increases the prospect of a retest of 1.4000 into Q2. Support holds at 1.3745 while resistance remains at 1.3854 (Oct 21st), if breached look for 1.3977 (Oct 13th) next.

EURCAD continues to strengthen hitting a fresh 6-month high as the combination of weaker commodity prices and a dovish BoC continues to keep the loonie under selling pressure. Support resets to 1.4580 while resistance rises to 1.4700.

Euro steadies near 1.0600 ahead of US jobs data. Euro is treading water heading into the US jobs data as global risk sentiment sours. Domestically German inflation levels remains unchanged at 9.3% and is expected to support the ECB’s hawkish stance. A weaker than expected US jobs result could see the Euro spike from an ongoing hawkish ECB. Today the US jobs data will be the primary driver to currency markets today, while ECB President Lagarde speech should provide support for Euro. Support rises to 1.0530 while resistance resets to 1.0650.

GBPEUR strengthens in early trading after the UK growth data surprised markets, growing more than expected in January. Support lowers to 1.1200 (.8928) while resistance remains at 1.1400 (.8772).

GBP bounces on stronger UK growth data. The UK economy grew by 0.3% in January, exceeding expectations as the country continues to fend off what economists see as an inevitable recession. The UK remains the only country in the G7 that has not fully recovered its lost output from the covid19 pandemic. Intraday the US jobs data be the primary currency market driver, a report above or below expectations will see market volatility increase. Support resets to 1.1900 while resistance rises to 1.2050.