- Strong US employment data
- Good chance of FED rate hike this year
- Thursday's ECB press conference the main event of the week
Friday saw the release of Non-Farm payrolls in the United States. After last month's poor release, this figure was very closely watched to see if the United States may be headed into a confirmed downturn. The actual figure came in better than expected as it was reported that payrolls increased by 242,000 last month and December’s figure was revised upwards by 30,000. The unemployment rate remained steady at 4.9%. The Dollar weakened on the news which would suggest that we will need to see more sustained improvement on the data front to support the Dollar’s momentum. In the interim of little data to focus on policy maker, rhetoric will be closely followed so speeches by Fischer and Brainard this afternoon may garner more attention than usual.
The focus this week will be in the Eurozone and the ECB meeting on Thursday. The single currency has lost some ground in January as ECB Chief Mario Draghi has hinted that the Central Bank has more in the tank in order to stimulate the slowing economy. Traders got badly burnt in December when they were expecting the ECB to do more than cut the deposit rate by 10 basis points and extend quantitative easing by 6 months so it is no surprise that the move lower has not been quite as expansive as in the past. For now the single currency is likely to remain within current ranges until we get some confirmation on Thursday.
Today is very light on the data front with no tier 1 data due for release. Markets should remain range bound as traders square books ahead of the crucial ECB meeting on Thursday. There are a few central bank speakers however most are expected to toe the party line. For now we should remain in a holding pattern.
FX Research by Ricky Nelson
Daily Currency Analysis with Michael Condron
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