Here's what investors need to know for Friday, March 10:
Markets remained cautious early on Friday as participants awaited the U.S. February non-farm payrolls report, which could have a big impact on the U.S. Federal Reserve's interest rate outlook, and avoided taking large positions. The U.S. dollar index held steady above 105.00 after falling on Thursday, while U.S. stock futures traded in negative territory. Statistics Canada will also release labor market data for February and European Central Bank (ECB) President Christine Lagarde will speak later in the day.
On Thursday, data from the Labor Department showed weekly initial claims for state unemployment benefits rose by 21,000 to 211,000 for the week ended March 4. Despite the risk-off market environment, the greenback struggled to find demand during the U.S. session. The dollar continued to weaken against its main rival as the benchmark 10-year U.S. Treasury yield fell more than 2% on the day.
Edward Moya, senior market analyst at OANDA in New York, said:"A lot of traders are breathing a sigh of relief that we're starting to see some softness in the labor market and the concern is that if we get a strong jobs report tomorrow, it's just going to Consolidating expectations for a rising rate hike of 50 basis points."
The 10-year U.S. Treasury yield continued to trade lower early Friday, last down more than 2% on the day at 3.82%. However, the dollar has remained resilient for now.
Federal Reserve Chairman Jerome Powell on Wednesday reiterated his testimony to Congress on Tuesday about higher, faster rate hikes, but stressed that the debate is still ongoing and decisions depend on data released before the March meeting.
Traders of fed funds futures are now pricing in a 60% chance the Fed will raise rates by 50 basis points, up from around 22% before Powell’s comments on Tuesday.
U. S. non-farm payrolls are expected to rise by 205,000 in February, following a sharp increase of 517,000 in January. Annual wage inflation, as measured by average hourly earnings, is expected to rise to 4.7% from 4.4% in January. Of particular interest may be the average hourly wage data. Amid extreme labor shortages, businesses are offering higher pay to hire fresh talent. And higher pay is forcing households to spend more, which ultimately boosts the U.S. consumer price index (CPI). The economic indicator was seen rising to 4.7 percent from 4.4 percent previously.
Next Tuesday's consumer price data will also be key to the Fed's decision. The data is expected to show prices rose 0.4 percent in February.
If the job market remains strong and inflation remains high, Treasury yields could face further rises, which would also boost the dollar.
EUR/USD rose 0.36% to close at $1.0582 on Thursday, away from Wednesday's near two-month low of $1.0524.
EUR/USD traded in a tight range just below 1.0600 during the European morning following Thursday's bounce. The bulls continued to have the upper hand on Friday, awaiting the U.S. jobs report for February and a speech from ECB President Christine Lagarde.
However, Lagarde is unlikely to comment on the policy outlook later in the day as the ECB is already in a 'quiet period'.
Inflation concerns and Fed Chairman Powell's hawkish testimony made EUR/USD bears hopeful, with the U.S. dollar index oscillating above 105.20 after a gradual adjustment. Upbeat U.S. non-farm payrolls could further strengthen dollar bulls. Tonight's US non-farm payrolls data will provide clearer guidance.
Sterling was one of the best-performing currencies on Thursday, rising 0.67 percent to $1.1922 after falling to a more than three-month low of $1.1801 on Wednesday.
During the European morning on Friday, GBP/USD attracted some buyers and climbed to a three-day high around 1.1950 in response to better-than-expected UK monthly GDP data.
Earlier, the Office for National Statistics announced that the real gross domestic product increased by 0.3% in January, exceeding market expectations of 0.1%, while manufacturing production and industrial production contracted by 0.4% and 0.3% respectively during the same period. This largely offset disappointing manufacturing and industrial production data from the UK, which in turn was seen as providing some support to the pound. In addition, the continued pullback in the US dollar from three-month lows also provided additional support for GBP/USD.
However, traders are likely to avoid aggressive bullish bets around GBP/USD and position for a recovery from the 1.1800 mark this week, or a fresh year-to-date low ahead of the US national jobs report. The closely watched U.S. monthly employment data will be released during the North American morning session and will play a key role in shaping the Fed's policy outlook. This in turn will drive demand for the greenback, giving GBP/USD fresh directional momentum.
USD/JPY fell 0.89% to 136.11 on Thursday. It hit a three-month high of 137.90 on Wednesday.
As expected, the BOJ kept its policy settings unchanged after the last policy meeting chaired by outgoing BOJ Governor Haruhiko Kuroda as domestic demand and wages failed to stimulate inflation in the Japanese economy. At the news conference, Kuroda reiterated that they would not hesitate to ease monetary policy further if necessary, but the comments failed to elicit a meaningful market reaction.
The Bank of Japan is expected to end its long-term yield control policy this year, but will not make major changes this week, according to a Reuters poll of economists.
USD/JPY was marginally higher on the day at 136.49 at time of writing.
USD/CAD extended its weekly gains on Thursday to hit 1.3850, its highest level since October, on Friday before easing back to 1.1830. Canada’s unemployment rate is expected to rise to 5.1% in February from 5% in January, with a net change in employment of +10K.
Spot gold took advantage of lower U.S. Treasury yields to climb back above $1,830 on Thursday. London gold was trading in a narrow channel just above $1,830 early Friday.
Bitcoin fell more than 6 percent on Thursday and continued to pull lower early Friday. BTC/USD last tested $20,000, down nearly 2% on the day. Ethereum fell below $1,500, hitting its weakest level in almost two months at $1,392 before recovering slightly above $1,400 on Friday.
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