Morning! Here’s what you need to know to start your week.
To the scoreboard:
Dow: 20,903 +44 (+0.21%)
S&P 500: 2,373 +8 (+0.33%)
SPI 200 Futures – March (20 minute delay): 5,782 +3 (+0.05%)
AUDUSD: 0.7542 +0.0036 (+0.48%)
1. US payroll data comes in hot: By now you’d be well aware that that US non-farm payrolls (NFP) easily beat analyst’s expectations on Friday, adding 235,000 jobs in February (200,000 expected). Within the headline figure, average hourly earnings increased by 0.2% for the month, for a yearly rise of 2.8% which was in line with the consensus forecast. USD traders took profits from their long positions on Friday as the USD index lost 0.46%, but the currency is expected to hold its ground this week. If Fed chair Janet Yellen suggests a closer time frame for the next 2017 rate hike on Wednesday, it would give the USD another boost.
2. Stronger Euro: Traders will be watching whether the EUR can test its recent highs this week, following the comments last Thursday from European Central Bank (ECB) president Mario Draghi. As Draghi spoke the EUR climbed above $1.06 against the greenback, eventually closing Friday at $1.0678 on higher volumes which leaves the recent high on February 7 of $1.0750 within reach this week. With more upbeat indicators for the US and Eurozone markets, the expectation is for some downward pressure on the AUD as it treads water above the US75 cents range after bouncing up on Friday evening.
3. Big week of data: Today will be quiet, but there’s a big week ahead. Key data releases and policy statements are as follows: In Australia there’s the NAB February Business Survey tomorrow, and the ABS releases Labour Force data for February on Thursday. The US has the Producer Price Index on Tuesday (11:30pm AEDT), followed by Consumer Price Index and Retail Sales data on Wednesday (11:30pm AEDT) ahead of the Federal Reserve interest rate decision later that day (5:00am Thursday AEDT). China reports industrial productions and the Euro Area has CPI data on Thursday, with the EUR expected to be highly sensitive to any move away from the expected yearly increase of 0.9%. Also on Thursday the Bank of Japan releases its latest rates decision (1:00pm AEDT) with no major changes expected. Lastly, focus will be on the UK parliament, as both houses vote on changes to the bill authorising Brexit. If the bill is passed, prime minister Theresa May could invoke Article 50 to trigger Brexit as soon as Tuesday. The expected announcement of Brexit at some point this week is likely to put downward pressure on the pound.
4. ECB outlook: There was a surge in trading volumes (EUR/USD volumes up over 330%) at the end of last week, after suggestions that the ECB was considering raising interest rates before its bond buying program ends. Reports that a rate hike was tabled at the ECB meeting last week have since been confirmed, but it’s more likely that the ECB will maintain its current stance in the near term. No major shift in policy is expected at least until the outcome of the French election is decided in May.
5. Bitcoin is volatile: The value of Bitcoin (BTC) plunged in early trading on Friday, as the US Securities & Exchange commission denied a request to list an Exchange Traded Fund (ETF) which tracks Bitcoin onto the market, citing regulation concerns. The crypto-currency lost 18% immediately following the decision on Friday but clawed back to finish down 6.3% on Friday. Other options for bringing a Bitcoin ETF to market are still on the table, and in overnight trading BTC/USD was up another 4.3% to US$1,233.
6. No need to panic about Fed rate hike: An interest rate increase by the US Federal Reserve on Wednesday is the right decision according to Keith Wade, chief economist at asset management company Schroders. Wade cited the market’s relatively calm reaction to the Fed’s impending rate hike on Wednesday as a further sign that now is a good time to raise rates. Wade said even if there is fiscal uncertainty down the line, real interest rates are so low that now is a good time to normalise interest rate policy as the economy stabilises.