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  • Markets closed the week on a downbeat note with broad weakness across global equities.
  • The forex space took the dollar down a peg, but not enough to cause the bulls to capitulate while holding on to the 97 handle and above the neckline support down at 96.60/70.
  • Nonfarm payrolls were a big miss on the headline, but solid in the detail – US job growth came in 165k below expectations.

The USD traded on its back foot into the weekend with a broad decline against G10 FX, holding the 97 handle in the DXY while sterling  
was a major underperformer, propping up the index following Brexit headlines and no concessions from the EU on the Irish backstop ahead of next week’s Parliamentary vote.

The headline nonfarm payroll number at +20K surprised sharply to the downside even as the blow-out January print was revised higher (to +311K). Weather distortions may be part of that story, in our view,” analysts at TD Securities explained.

On the upside, the unemployment rate was down to 3.8% and household job growth was strong. Also, wages continue to trend higher with a solid +0.4% m/m increase printed in February which pulled the annual growth rate to a cycle-high of 3.4%.

However, all in all, the mood has been soured by global growth concerns following US and China trade data, gloom and doom ECB meeting and uncertainties over Brexit and trade wars between China and the US. For those reasons, April gold added $13.20, or 1%, to settle at $1,299.30/oz after briefly trading as high as $1,301.30, ending up 10 cents from the week-ago finish. On a spot basis, gold rallied to a high of $1,300oz from within the day’s range of $1,285/00.80oz.  

Currency action:

  • EUR/USD recovers on Friday, still heads for lowest weekly close since June 2017

  • USD/CAD pulls away from two-month highs, looks to close week below 1.3450

  • GBP/USD drops to 2-week near 1.3000 despite USD weakness

  • EUR/GBP recovers from the dovish ECB meeting and hits 3-day highs

  • AUD/USD pops and drops on nonfarm payrolls miss, but bets are still for a break below 0.70 handle

  • USD/JPY slides below 111 as USD weakens on disappointing NFP figures

  • GBP/USD bounces off 2-week lows post-NFP, but remains well below 1.3100 handle

 

Key events from US session:

 

  • Wall Street closes in the red by over 2% across the DJIA, S&P 500 and NASDAQ

  • NFP: Should the Fed be concerned about the state of the economy?  – NBF

Key events ahead

The market will return to a quiet data calendar on Monday but there will be a focus on Brexit as we move into the eleventh hour.  

Analysts at Westpac noted the key event timeline and options as we count down to Article 50 as follows:

Extensions likely, but uncertainty persists

The series of options seem to have a common theme of extending the period of negotiations to allow for:

  • A solution to improve support for the current Withdrawal Agreement
  • A means of negotiating another form of Withdrawal Agreement
  • A second People’s Vote or referendum to be held
  • New UK general elections to be held
  • Legal logistics should the current Withdrawal Agreement be passed
  • A less disorderly “no deal” exit to develop
  • Or even a move to scrap Article 50 and remain in EU
  • This weekend – Negotiations may continue into Monday 11th March
  • 12th March – Next “meaningful vote” on Brexit in UK Parliament
  • 13th March – Parliamentary vote on opposing “no deal” exit option
  • 14th March – Parliamentary vote on extending negotiations/Article 50
  • 21st – 22nd March – EU Leaders’ Summit
  • 29th March – Article 50 end date
  • 9th May – European Council (heads of state) meeting
  • 18th – 23rd May – EU Parliamentary elections
  • 20th – 21st June EU Leaders’ Summit

Elsewhere the following are the key events of which analysts at TD Securities go into some detail for a preview:

12th March US CPI

“We expect CPI to stabilize at 1.6%, reflecting a 0.2% m/m with risk for a 0.3% print. Price pressures will benefit higher food and gasoline prices and another solid 0.2% increase in core CPI, leaving the latter unchanged at 2.2%. There is risk for a slight deceleration in shelter, but we expect strength elsewhere, including tariff-related categories, medical care and airfares.”

11th March US retail sales:

“We expect notably weak auto and gasoline sales to drive headline retail sales 0.5% lower in January, following the sharp 1.2% m/m decline in the prior month. Indeed, headline ex-auto sales should come in flat for the month. On a positive note, we anticipate core retail sales to bounce back 0.4% m/m after December’s unexpected 1.7% tumble.”

Australia 12/13 March

“NAB confidence/conditions barely moved in Feb after the Dec slump. With a May election likely to generate a non-business friendly govt, no rebound and could slide further. Consumer sentiment is expected to tank after soft GDP spurred calls for RBA cuts. Consumers tend to associate rate cuts with “something is wrong” and we expect sentiment to slide back to 99 (prior 103.8).”

UK 12-14 Mar

Meaningful Vote 2 & Follow-ups

“Parliament votes on the Withdrawal Agreement on Tues, with hopes high that May can secure concessions from the EU over the weekend. We see about 35% chance it gets approved (see our latest update), meaning votes on No Deal (unlikely) & A50 Extension (possible) on Wed (and Thurs?). If all votes are defeated, markets could take this very negatively. The budget update is Wed too.”

15 March BoJ

“We expect no change in policy. Recent comments from Kuroda highlight that further easing could be contingent on the JPY. These are not credible however as the BOJ is hamstrung by a deterioration in JGB conditions as evidenced in its dealer survey. This, alongside global growth worries, could feature prominently in the upcoming meeting.”