Fridays Non-farm payroll data came in under estimates to print March figures of only 98k against an expected 174k.The initial reaction was for the USD to tumble as we saw the USD INDEX move into the red following the release, but cooler heads prevailed as markets revaluated the data and could not set aside the impressive improvement in the unemployment rate which fell from an expected 4.7% to print at 4.5%. The impressive improvement in the unemployment rate resulted in the USD making a U-turn and pressing higher to finish the week on a strong note.
In commodities, we saw sudden strength in gold which was driven higher by geopolitical factors when the USA bombed Syria in retaliation for the alleged use of chemical weapons by the Assad regime. Gold initially spiked to 1270 in early trade only to have the direction reversed by end of day to see gold finish around the 1255 level. The drop came in line with the strengthening dollar but markets will remain jittery as tension heat up regarding Syria with Russia and Iran both stating that US attacks are unwarranted and that if they continue action will be taken.
Today’s key data come in the form of a speech by ECB`s Constancio for the EU and by Fed Chair Yellen for the USA. Traders will be watching both speeches with interest as they try and decipher what is install for the respective economies in terms of monetary policy. The EUR has suffered over the last two weeks, unable to hold on to the previous gains as we saw the EURUSD tumble from 1.0900 to trade below 1.0600 in an aggressive two week sell off while the USD has managed to stay bid as traders remain optimistic of the US economic recovery.
A more hawkish tone by the speakers will bode well for the respective currencies as traders’ price in the better than expected conditions while more dovish tone by either will see their respective currencies weakened as trader price in an expected worsening of economic conditions.