British Pound erases gains with Article 50 extension request, US Dollar is supported by solid NFP data
What’s been happening?
Pound Sterling – UK Markets
The British pound fell to its weakest level vs the dollar in nearly a week on Friday as EU officials’ scepticism on the UK’s request for an extension to Article 50 weighed on the currency. Against the euro, the sterling extended its slide and erased the gains that it recorded in the first half of the week.
Regarding another delay to Brexit, Dutch Prime Minister Mark Rutte said that British Prime Minister Theresa May’s request raised many questions and argued that it was not enough for them to grant an extension. On a similar note, The Guardian's Brussels Bureau Chief Daniel Boffey said that France, Spain, and Belgium put no-deal Brexit option back on the table at Friday’s EU27 ambassadors’ meeting and added that officials didn’t see anything in PM May’s letter to justify a long extension.
US Dollar – US Markets
The U.S. Bureau of Labor Statistics on Friday reported that nonfarm payrolls in March increased by 196,000 following February’s dismal reading of 33,000 (revised up from 20,000) and surpassed the analysts’ estimate of 180,000. Furthermore, the unemployment rate stayed unchanged at 3.8% as expected in the same period. Although the initial market reaction boosted the demand for the greenback, the underlying details of the publication capped the gains of the currency.
The wage inflation, as measured by the average hourly earnings, came in at 0.1% on a monthly basis to fall short of the market expectation of 0.3% and dragged the annual rate down to 3.2% from 3.4%. Furthermore, the labour force participation rate edged down to 63% from 63.2%. Nevertheless, the US Dollar Index closed the week in the positive territory for the second straight time.
Meanwhile, President Trump voiced his criticism of the Fed’s monetary policy on Friday while talking to reporters on the White House lawn. Trump argued that the Fed should move toward "quantitative easing" instead of “quantitative tightening” and stop the balance sheet runoff.
Euro – European Markets
The shared currency stayed relatively calm on Friday and closed the day modestly higher vs the pound sterling while suffering small losses against the dollar amid a lack of fundamental drivers. Despite Friday’s choppy market action, the euro posted its lowest weekly close since June of 2017 as the macroeconomic data releases throughout the week pointed out to a meaningful recovery in the eurozone economy.
What’s coming up?
UK: There won’t be any macroeconomic data releases from the UK on Friday and markets will remain focused on political developments and headlines surrounding Brexit talks.
US: The nonfarm payrolls report, which will include unemployment rate, average hourly earnings, and labour force participation rate, will be watched closely by market participants. Analysts expect the NFP to increase by 180K in March following February’s dismal 20K reading.
EU: In the absence of macroeconomic data releases from the euro area, markets will be looking for headlines coming out of the Eurogroup meeting on Friday.