US Non-Farm Payrolls Report

While keeping its monetary policy unchanged, the ECB upgraded the currency bloc’s economic growth outlook in its meeting yesterday, driving sentiment in currency markets. However, with Euro zone economic data still failing to inspire confidence, it remains to be seen if the central bank manages to attain its targets. At home, although the BoE expectedly kept its policy unaltered, the steadily improving economy are likely to compel the British central bank to rethink its policy stance. Across the Atlantic, recent economic data has been largely distorted due to the harsh weather conditions and today’s non-farm payrolls is expected to offer more of the same. Markets will take a breather next week in the wake of a relatively light global economic calendar.

Pound Sterling – UK Markets

As was widely anticipated, the BoE maintained status quo with regards to its policy in its monetary policy meeting held yesterday, with none of the central bank officials commenting on the future course of action. However, in the wake of the domestic economic recovery gaining traction, the BoE is finding it increasingly difficult by the day to convince markets that an interest rate hike is a distant prospect. Sterling showed little movement against the majors following the BoE meeting, but strengthened against the greenback later in the day. However, the Pound weakened against the Euro after the ECB kept its interest rates intact and upgraded the Euro zone economic outlook for 2014. The Pound is trading in a tight range against the Euro in today’s trading session. Meanwhile, data just out has shown that inflation expectations among consumers in the UK for the next twelve months have eased. With no domestic economic data on tap today, important US macroeconomic releases will influence trading in the Pound-US Dollar pair going forward. Looking ahead, a relatively light domestic economic calendar await investors next week.

US Dollar – US Markets

The greenback weakened against both the Pound and the Euro yesterday tracking the twin central bank meetings in Europe. However, better than expected domestic jobless claims numbers somewhat limited the US Dollar’s losses against the majors yesterday. The number of people applying for first time jobless benefits in the US fell more than expected during the last week, fuelling hopes that the economy will be back on the recovery track, once the rough weather conditions subside. Meanwhile, distortions in the February non-farm payrolls numbers, scheduled for release later today, cannot be ruled out, especially in the wake of the dismal private payrolls report released earlier this week. However, an upside surprise on this front will propel the greenback higher against its counterparts today. The US Dollar is trading lower, albeit in a tight range, against the majors this morning. Apart from the labour market report, domestic trade data will also attract market attention in the session ahead. In the forthcoming week, investors will keep a tab on the Reuters/Michigan consumer sentiment index, retail sales and the monthly budget statement for further direction.

Euro – European Markets

The common currency strengthened against its counterparts yesterday after the ECB, rather surprisingly, decided to keep its monetary policy unchanged altogether, while also upgrading the currency bloc’s growth outlook for 2014. The ECB forecasted the Euro zone economy to expand by 1.2%, higher than the 1.1% growth it had projected at the end of last year. However, the central bank downgraded the region’s inflation outlook, adding to fears of deflation in the currency bloc and highlighted that risks to economic outlook persists on the downside. Meanwhile, the single currency’s gains were limited later in the day following the release of positive economic data from the US. The Euro has held to its yesterday’s gains and is trading in a tight range against the majors this morning. Investors in the common currency will closely watch the German industrial production report today to gauge the strength in the nation’s industrial sector, especially in the wake of yesterday’s better than expected factory orders data. Additionally, the Euro-US Dollar pair will take direction from vital US labour market report later today. Moving ahead, investors will keep a tab on the string of important domestic economic data next week for further direction.

Other Currencies – Highlights

The Swiss Franc is trading on a stronger footing against most of its major counterparts in today’s trading session, despite the release of weaker than expected domestic consumer price inflation report which indicated an annual deflationary trend in the nation, while the domestic unemployment rate remained steady for February. The disappointing inflation print will add to the SNB’s woes as it tries to spur the economy from its prolonged slowdown. However, safe haven demand for the Swiss Franc has underpinned its demand amid persistent tensions in Ukraine. In the absence of major domestic economic data today, investors in the Swiss Franc will keep a tab on news flows emanating from both sides of the Atlantic for further direction to risk appetite. Additionally, a slew of domestic and international news flows next week will sway trading sentiment in the Swiss Franc in the near term.