EUR / USD
The Euro remained under pressure ahead of Friday’s New York open with further concerns over the impact of the Ukraine crisis and damage to the Euro-zone economy. The single currency continued to test the 1.1000 support area and dipped below this level which triggered a round of stop-loss selling.
US non-farm payrolls increased 678,000 for February after a revised 481,000 January increase and well above consensus forecasts of 400,000. Manufacturing jobs increased 36,000 on the month with a 60,000 increase for construction. There were solid increases in most categories with a 179,000 gain for the leisure sector.
The unemployment rate declined to 3.8% for the month from 4.0% and below expectations of 3.9% and the household survey recorded an increase of close to 550,000 in the number of employed while the participation rate edged higher.
Average hourly earnings were unchanged on the month, well below expectations of a 0.5% increase, with the annual increase slowing to 5.1% from 5.5%.
The data reinforced expectations that the Federal Reserve would push ahead with rate hikes and provided fresh impetus for the US dollar which strengthened to 21-month highs. The Euro remained vulnerable and slumped to 22-month lows below 1.0900 before a slight correction to around 1.0920.
CFTC data recorded a further increase in long speculative Euro positions to near 65,000 contracts from close to 60,000 the previous week which indicated that funds had been caught out by buying the single currency, increasing the risk of further selling unless there is a recovery in risk conditions.
Energy prices surged again on Monday as the US considered a ban on Russian oil exports and fears over the Euro-zone outlook increased further as stagflation fears intensified. The Euro slumped to 22-month lows at 1.0825 before a limited recovery to 1.0875 while commodity currencies posted further net gains.
JPY
US treasuries dipped lower in immediate response to the stronger than expected US jobs data, but selling was curbed by the weaker than expected wages data. As equities came under further sustained pressure, there was strong demand for bonds with the 10-year yield declining to lows near 1.70% which sapped dollar support.
Chicago Fed President Evans stated that the jobs market has been strong for some time and the data will not change Chair Powell’s stance on monetary policy. He added that he expected the Fed Funds rate to be 1.75-2.00% at the end of the year which would take rates close to neutral.
The slide in equities and US yields triggered renewed support for the yen and the dollar dipped to around 114.70 at the European close.
Risk appetite deteriorated again in Asia on Monday with a slide in regional equities and a renewed decline in US yields. Defensive yen demand was stifled slightly by the impact of escalating oil prices on the Japanese economy. The dollar traded close to 115.0 against the yen with the Euro just above 125.0 after a dip below this level.
GBP
The UK construction PMI index strengthened to an 8-month high of 59.1 for February from 56.3 the previous month and above consensus forecasts of 57.3. There was strong growth in the residential sector while new orders increased at a faster rate on the month. There was, however, a significant dip in confidence with notable concerns over the impact of inflation and cost pressures, even though the rate of prices increases retreated to an 11-month low.
The data failed to underpin Sterling with global risk trends dominating. The FTSE 100 index was subjected to further sustained selling which undermined the Pound and the UK currency dipped to lows near 1.3200 against the dollar as the wider slide in global risk appetite had an important impact in sapping overall currency support. The Euro fared even worse and dipped to fresh 5-year lows near 0.8230 before a slight recovery.
There will be further unease over the impact of a surge in energy prices on the economy. Risk Appetite dipped sharply again in Asia on Monday, but the Pound did find some support at 2-month lows below 1.3200 and settled just above this level in Europe with the Euro sliding to fresh 5-year lows close to 0.8200 before a slight recovery.
CHF
The Swiss franc continued to secure strong defensive support on Friday as fears over the Ukraine crisis continued to escalate. The Euro declined sharply to fresh 5-year lows just above parity against the franc while the dollar was unable to make any headway and settled around 0.9170.
The Swiss currency secured further defensive support on Monday with the Euro sliding below parity for the first time in over seven years as overall risk conditions deteriorated. The pair traded just above this level in early Europe with the dollar just above the 0.9200 level with markets monitoring National Bank actions.
Technical Levels
