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Weekly Review March 13


Date of publication: March 13, 2017 | Author: Tim Clayton

The US employment release was the biggest data event of the week, although the ECB policy meeting had the largest market impact as the Euro staged a comeback. Bond yields increased during the week, especially in Europe, while equity markets remained extremely buoyant.

US

Early in the week, the dollar had been unsettled by an increase in the January US trade deficit to the highest level for close to five years at $48.5bn which increased trade protectionism fears.

The US ADP employment report for February reported an increase in private-sector payrolls of 298,000 for February from an upwardly-revised 261,000 previously and well above consensus expectations of 190,000.

Futures markets indicated that the chances of a March Fed rate increase had increased to near 90% late in the week. The US employment report was stronger than expected with a 235,000 increase for February after a revised 238,000 gain for January, reinforcing expectations of a rate hike on March 15th, although there were no comments from Fed members during the blackout period.

EUR/USD found support above the 1.0500 level and rallied to a one-month high close to 1.0700.

UK

UK industrial production data was slightly weaker than expected, although the overall impact was limited as the underlying tone remained firm.

Chancellor Hammond’s budget release also had little market impact with the main focus being a row of proposed tax increases for the self-employed rather than a higher 2017 GDP growth forecast.

Uncertainty surrounding Brexit continued with the government losing another vote in the House of Lords on parliamentary approval for any Brexit deal, although Prime Minister May remained committed to triggering Article 50 by the end of March.  GBP/USD was trapped below 1.2200 while EUR/GBP rallied to seven-week highs near 0.8770.

Euro-zone

Euro-zone economic data had little impact during the week while concerns surrounding the French Presidential election eased slightly.

The ECB left interest rates unchanged following the latest policy meeting and there were no changes to the bond-purchase programme or formal forward guidance There was more upbeat rhetoric from President Draghi and the statement indicated that the ECB does not expect to lower interest rates any further.

Late in the week, there were also source reports that the ECB could raise interest rates before the bond-purchasing plan ended and the Euro gained strength on most major crosses.

International

The latest Chinese trade data was mixed with a sharp increase in imports triggering a rare deficit for the month.

Oil prices were subjected to sharp selling pressure during the week as US crude inventories continues to increase with WTI at 3-month lows below $48.50 p/b.  There was wider selling pressure on commodities which had a negative impact on the Australian and Canadian dollars while a sharp decline in dairy prices undermined the New Zealand dollar.

The Reserve Bank of Australia left interest rates on hold at 1.5% following the latest policy meeting.

The Canadian employment data was stronger than expected with a 15,300 increase in employment as unemployment declined to 6.6% from 6.8%.

 

 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 

 

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