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February 15th - Nick Timiraos, a vocal advocate for the Federal Reserve, wrote that key indicators of the U.S. economy are pointing in the same positive direction: inflation is declining, the labor market remains strong, and economic growth is solid. This is not a definitive conclusion, but it represents the closest the U.S. economy has ever come to a soft landing (i.e., curbing inflation while avoiding a recession). Just four years ago, many economists thought this was impossible. Now, the scenario of the U.S. economy bringing inflation back to the Feds 2% target without falling into recession is once again credible. However, even without oxygen masks, its too early to unfasten the seatbelts. The Feds preferred inflation gauge, the core PCE annual rate, is currently close to 3%, and many forecasters expect little progress in inflation this year as tariff-related price increases spread further. Meanwhile, the labor market may not be as robust as last weeks report suggested. Payden & Rygels chief economist, Jeffrey Cleveland, stated that objectively speaking, the labor market has been weak, and the unemployment rate is more likely to rise than fall this year.February 15th - European Central Bank President Christine Lagarde stated during a panel discussion at the Munich Security Conference on Sunday that current market developments indicate investors are interested in allocating more capital to Europe. Creating incentives for European investment is a better approach than using taxes to prevent capital outflows. Lagarde believes that US President Trumps disruptive trade policies serve as a "spur" for Europe to accelerate economic reforms. Beyond economic challenges, this has also brought European leaders closer together. She stated that the EUs €90 billion ($107 billion) support package for Ukraine demonstrates that the union can drive meaningful decision-making even if not all member states support an agreement.U.S. Secretary of State Marco Rubio: The United States has taken note of reports from various countries assessing the poisoning of prominent Russian opposition politician Alexei Navalny. The United States does not question this assessment, nor is there any reason to question it.US Secretary of State Marco Rubio believes that President Trumps aide Witkov and Trumps son-in-law Kushner are "at this moment" traveling to Iran for an important meeting on Iran.Slovak Prime Minister: Hopes to sign an agreement with Westinghouse Electric Company next year to lead the construction of a new nuclear power plant.

EUR/USD Expects Fourth Weekly Gains Above 1.0900 Despite The US Dollar's Rebound Advance Ahead Of US NFP

Daniel Rogers

Apr 07, 2023 11:42

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Despite a recent retreat, the EUR/USD bulls maintain control around 1.0920. This reflects the typical Good Friday inactivity and apprehension ahead of the US Nonfarm Payrolls (NFP) report released early in the day. The major currency pair was volatile on Thursday as a result of the US Dollar's initial rebound on fears of a recession, but ended the day unchanged as disappointing US data contrasted with stronger Eurozone data.

 

Fears of a recession in the world's largest economy were prompted by consecutive lackluster US data and falling US Treasury bond yields, giving USD bears a reprieve on Thursday morning. As traders prepared for the all-important NFP, the dollar's subsequent gains were reversed by another disappointing US employment report.

 

Despite this, US Initial Jobless Claims for the week ending March 31 rose to 228K from 200K anticipated and an upwardly revised 246K the prior week. Notable is the increase in Challenger Job Cuts from 77,77K to 89,703K in the given month.

 

Notably, Reuters fanned fears of a recession by citing the most recent decline in the preferred bond market indicator of Federal Reserve (Fed) Chairman Jerome Powell. The most reliable bond market indicator of an imminent economic contraction, according to Federal Reserve research, is the "near-term forward spread" between the forward rate on Treasury bills 18 months from now and the current yield on three-month Treasury bills.

 

According to Reuters, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated in prepared remarks on Thursday that the global economy is projected to expand by less than 3% in 2023, a decrease from 3.4% in 2022.

 

In other news, Germany's Industrial Production (IP) increased 0.6% year-over-year in February, versus market predictions of -2.7% and previous readings of -1.7%. Additionally, the monthly figures exceeded expectations by 0.1%, coming in at 2.0% compared to 3.7% previously. On Wednesday, Germany Factory Orders for February improved to -5.7% YoY from -12.0% previously revised down and -10.5% market expectations, while MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings.

 

Wall Street and US Treasury bond yields have both reduced weekly losses as a result of these strategies, but investors remain skeptical.

 

In the context of less liquidity surrounding the March US employment report, sporadic activity on the major markets can keep the EUR/USD inactive and prone to abrupt price swings. Notable is the fact that recent dovish Fed forecasts and disappointing US data generate expectations for a positive surprise and enormous price volatility thereafter.


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