USD

Friday’s February payroll data was somewhat overshadowed by events escalating from the collapse of SVB Bank and the potential it creates for increasing contagion. Amongst the data, there were another 311k headline payroll gains. Still, overall unemployment increased from 3.4 to 3.6%, and wage growth missed, rising by ‘only’ 0.2% over the past month, having been expected to have gained by 0.3%. The dollar index (DXY) remains close to the recent low, perhaps aided by the ongoing rally in Treasuries. Still, the move there looks to be a classic flight to safety, as yields in the US two-year declined by over 35bps this morning alone. Markets will also need to determine whether the events surrounding SVB will now materially impact the Fed’s ability/appetite to raise US rates, which will feed further into dollar moves over the coming days.

EUR

Next week’s ECB meeting looks set to see another 50bps rate hike from the good people at the ECB. However, markets will be far more focussed on what the ECB is saying about the path for future rate hikes, with the ECB’s Robert Holzmann recently pinning his mast to a whopping 200bps worth of hikes beyond that. Holzmann is a known hawk, so we should balance his views against the more dovish members of the ECB. Having declined by over 1% earlier in the week, EUR/USD has made steady progress higher over the past three days, but today’s NFP report will likely dictate whether this recovery has any sustainability or not.

GBP

GBP/USD rallied to levels not seen since the middle of February earlier this morning (Monday), as the pound benefitted from more robust UK growth data and that weaker dollar (see USD). Looking ahead, the latest UK employment data, due for release tomorrow morning, will give markets further evidence of the ongoing strength of the UK economy, even if events outside of the UK ultimately determine whether GBP/USD remains buoyant from here. 

JPY

The yen has seen strong inflows (much the same as the CHF), typical in times of ongoing stress and uncertainty in global markets. USD/JPY has, therefore, now declined by over 3% since the middle of last week to record a one-month low, and further declines look likely until markets settle. 

CAD

Another solid employment report will give the BoC food for thought, with the Canadian economy gaining a further 21.8K job gains through February, having recorded 150k and 69k gains in the previous two months. Overall unemployment remains steady at 5%. However, USD/CAD will remain vulnerable to developments south of the Canadian border for now, even if the pair managed to drop by around 0.4% through Friday. 

MXN

Broad market risk aversion has weighed heavily on the Peso, with USD/MXN rallying by a whopping 5% over the past four days and moving to a five-month high in the process. While the Peso remains fundamentally attractive, further declines cannot be dismissed until broader market risk dissolves somewhat.

BRL

USD/BRL has mirrored that of USD/MXN, with the pair rising over the past two sessions, albeit to a lesser degree – which may change once the BRL spot market opens. 

CNY

USD/CNY has moved in the opposite direction, with the CNY rising by around 1% since the middle of last week.