Dollar Extends Recovery On Easing Trade Fears, European Stocks Advance

FOREX: The US dollar rose by 0.20% to a two-week high of 107.14 against the Japanese yen on Thursday after a late recovery by US equities. Looking ahead, Friday’s non-farm payrolls report is still a major point of focus for traders. The US dollar index moved marginally higher, edging up to 90.15. Euro/dollar pared earlier losses which drove the pair to a two-week low of 1.2248. The single currency, which is currently challenging its medium-term ascending trend line, may have to wait until the release of the NFP report to break out of its tight consolidation range against the greenback. Pound/dollar fell by 0.13%, snapping a four-day streak of gains on the back of a stronger dollar. The antipodean currencies dropped, with aussie/dollar being down at 0.7681 (-0.38%) and kiwi/dollar lower at 0.7283 (-0.29%). Dollar/loonie was last seen at 1.2778 (+0.07%) after it recorded a fresh five-week low of 1.2744 earlier.

STOCKS: European stocks advanced considerably, taking their cues from a rebound in US equities. Technology companies and miners led the Stoxx Europe 600 higher by 1.40%, with the index hitting the highest level in two weeks. The blue-chip Euro STOXX 50 was up by 1.61%, while the German DAX 30 rose by 1.57%. The French CAC 40 moved higher by 1.56%, the Spanish IBEX 35 jumped by 1.46% and the British FTSE 100 advanced by 1.16%. In the US, the S&P, Dow Jones and the Nasdaq all surged yesterday. Futures tracking these indices are currently in the green, pointing to a higher open today.

COMMODITIES: Oil prices slipped during the early European afternoon. West Texas Intermediate crude fell by 0.19% to $63.25 a barrel, while Brent was down by 0.13% at $67.88 a barrel. In precious metals, gold prices dipped by 0.38% to $1,327.7 an ounce.

Day ahead: US & Canada to deliver trade figures; Japanese household spending due in Asian session

Later on Thursday (1230 GMT), trade figures out of Canada and the US will attract some attention especially in light of the latest developments involving the global trade. The latter will also see its weekly update on initial jobless claims ahead of the all-important nonfarm payrolls report due on Friday.

According to forecasts, the US trade deficit is anticipated to widen by $0.2 billion to $56.8 in February, reaching the highest level since October 2008. If the deficit comes in larger than predicted, Trump could press for a tougher stance during trade talks with China. Yesterday, after retaliatory moves between the US and China, the US National Economic Advisor Larry Kudlow removed a layer of uncertainty, saying that US tariffs on Chinese products are still proposals that may never go into effect, while both countries left a window open for intensive talks to take place.

Canada is also anticipated to face a larger negative trade balance in February, with the relevant measure said to have increased to C$2.0 billion from C$1.90 in January. In this case, though, the numbers could have a softer impact on the loonie amid rising confidence that a NAFTA deal could be secured soon.

Meanwhile, the number of people applying for unemployment benefits for the first time in the US is projected to have inched up by 10,000 to 225,000 in the week ending March 30. However, Friday’s NFP stats and particularly the wage component would be the hot spot of this week’s data releases as investors are eagerly waiting to see whether wages picked up speed, a fact that could push up inflationary pressures and hence drive the Fed’s preferred inflation gauge – the core PCE index – towards its 2.0% target.

Elsewhere, Japan will publish data on household spending during the early Asian session (2330 GMT). On a yearly basis, consumption is projected to have risen moderately by 0.3% in February, compared to 2.0% growth seen in the previous month, while month-on-month a contraction of 0.6% is expected to follow a sharp expansion of 2.7%, the highest growth recorded since April 2014.

Geopolitical developments could be also in focus in the following days as a report by the Nikkei citing stated that North Korea’s leader Kim Yong Un showed interest to return to six-party denuclearization talks, including North Korea, China, US, Japan, South Korea, and Russia during this last week’s meeting with the Chinese President Xi Jinping.

Regarding today’s public appearances, Atlanta’s Fed President Raphael Bostic (voter) will be giving a speech at 1700 GMT, thought the topic of discussion renders any comments on monetary policy unlikely.

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