You are here: Home > articles > Forex > Daily Market Comment – Dollar awaits the NFPs, BoC leaves rates untouched
Daily Market Comment – Dollar awaits the NFPs, BoC leaves rates untouched
March 9, 2023 9:27 amVideo
Latest News
- Market Comment – Geopolitics and Fedspeak keep stocks under pressure April 17, 2024
- Technical Analysis – USDJPY on the verge of hitting 155.00 milestone April 17, 2024
- Hot forecast for EUR/USD on April 17, 2024 April 17, 2024
- Overview for the GBP/USD pair on April 17th. British inflation could weigh on the pound April 17, 2024
- Technical Analysis – NZDUSD bounces off 5-month low April 17, 2024
- Overview for the EUR/USD pair on April 17th. There is no single reason for the euro to rise April 17, 2024
- Key events on April 17: fundamental analysis for beginners April 17, 2024
- Trading plan for GBP/USD on April 17. Simple tips for beginners April 17, 2024
- Trading plan for EUR/USD on April 17. Simple tips for beginners April 17, 2024
- Technical Analysis of Intraday Price Movement of USD/JPY Main Currency Pairs, Wednesday April 17, 2024. April 17, 2024
- Technical Analysis of Intraday Price Movement of Crude Oil Commodity Asset, Wednesday April 17, 2024. April 17, 2024
- Forecast for EUR/USD on April 17, 2024 April 17, 2024
- Forecast for GBP/USD on April 17, 2024 April 17, 2024
- Forecast for USD/JPY on April 17, 2024 April 17, 2024
- Outlook for EUR/USD on April 17. A boring Monday seamlessly transitioned into a boring Tuesday April 17, 2024
- Will the euro manage to save itself? April 17, 2024
- Analysis for GBP/USD on April 16th. The pound should not count on support from Powell April 16, 2024
- Analysis for EUR/USD on April 16th. The southern trend has been put on pause for correction April 16, 2024
- USD/JPY: Simple trading tips for novice traders on April 16th (US session) April 16, 2024
- GBP/USD: Simple trading tips for novice traders on April 16th (US session) April 16, 2024
US data points to still-tight labor market, focus turns on NFPs
In his second day of congressional testimony, Fed Chair Jerome Powell reiterated his message that interest rates may need to rise more and faster than previously estimated, but he also added that officials have not yet made a call on the size of the March rate hike and that their future decisions will remain data dependent.
It seems that he may have wanted to pour some cold water on speculation that a 50bps hike in two weeks is a done deal, but market pricing and the dollar were not moved much. Investors are still assigning a nearly 70% probability for a double hike, with the remaining 30% pointing to a quarter-point increment.
Perhaps they stuck to their guns as earlier data corroborated their view. The ADP employment report revealed that the private sector gained more jobs than expected in February, while the JOLTS job openings fell less than expected in January, suggesting that the labor market continues to strengthen.
The spotlight now falls on Friday’s nonfarm payrolls, where expectations point to a slowdown to 205k from 517k. That said, a slowdown from an outstanding print seems more than normal, and thus the dollar is unlikely to suffer if this is the case. After all, the unemployment rate is forecast to have held steady at a more than 53-1/2-year low of 3.4%, while average hourly earnings are forecast to have accelerated to 4.7% y/y from 4.4%.
Coming on top of the hotter-than-expected CPI prints for January, accelerating wages could intensify speculation that inflation may not come down as fast as previously thought and thereby allow market participants to increase their Fed hike bets. This is likely to add more fuel to the dollar’s engines.
Loonie the main loser as BoC stands pat
The loonie was the main loser among the majors yesterday, coming under pressure after the BoC decided to keep interest rates untouched, becoming the first major central bank to hit the pause button in this tightening crusade. Although in its statement, the BoC reiterated it remains prepared to increase rates further if needed, it also said that the latest data remains inline with the Bank’s expectations that CPI inflation will come down to around 3% in the middle of the year.
This was likely interpreted as the Bank’s intention to stay sidelined for a while longer and that’s maybe why the loonie declined even though yesterday’s decision was nearly fully priced in. Nonetheless, the market is still pricing in one more 25bps hike by December, meaning that there is ample room left for further declines should incoming data continue to come in soft.
The next key release from Canada may be the employment report for February, due out the same time as the US jobs report. The unemployment rate is expected to tick up to 5.1%, while the employment change is forecast to reveal that the economy added only 10k jobs. Combined with a strong US jobs report on Friday, this is likely to send dollar/loonie closer to the peak of October 13 at 1.3980.
Will Kuroda pass the torch untouched?
During the Asian session Friday, it will be the BoJ’s turn to decide on monetary policy. This will be the last gathering with Governor Kuroda at the helm, and investors may be eager to find out whether his exit will be accompanied by fireworks, or whether he will pass the torch to the incoming Governor untouched.
Latest economic data has been suggesting that there is no need to rush into taking another step towards normalization at this gathering, with several policymakers noting that Japanese inflation seems mostly fueled by surging import costs rather than strong domestic demand. That said, a recent survey on the bond market showed that December’s action has failed to reduce market distortions, which may have allowed some market participants to bet on further action at this meeting.
Therefore, if the Bank decides to wait for a while longer before removing further accommodation, those expecting action at this gathering will be disappointed and the yen could slip.
Related Posts: