News & Analysis


This morning’s jobs data did little to move the pound but should keep the Bank of England on track to continue its hiking cycle – although Thursday’s rate hike wasn’t exactly at the mercy of today’s release. Continued elevation in inflation and a robust recovery in employment despite the removal of the government furlough scheme in Q4 2021 paves the way for the BoE to hike again on Thursday, with markets pricing in over 25bps of hikes. Payrolled employees from February doubled the forecast and printed at 275k, while January’s 3M unemployment rate fell from 4.1% to 3.9% vs expectations of 4.0% – although this is in part driven by a fall in the participation rate. Wages grew further by another 4.8% YoY – 2% higher than expectations. Higher wage growth may be the only detail of the report that could see an MPC member vote for a hike vs unchanged rates, but we don’t expect it to change the overall decision on Thursday.


Sentiment around the euro is fully driven by Russia-Ukraine headlines and overall risk at the moment, as traders have now digested the European Central Bank decision from last week. Ongoing peace talks between Russia and Ukraine are showing no signs of de-escalation, however, the weakness in European currencies seems to have taken a breather regardless as markets remain cautiously optimistic. Beyond ongoing peace talks, markets will focus on German ZEW survey data and eurozone industrial production at 10:00 GMT. The ZEW survey – an economic sentiment indicator – is set to show a sharp contraction given the impact of the war and inflationary pressures. This is unlikely to drive the euro lower by itself, especially as the ECB will focus on getting inflation back on track. Eurozone industrial production is likely to have declined in January, with the consensus foreseeing a 0.5% contraction YoY while the MoM figure is set to print exactly at 0.0%.


The US dollar took on some water this morning amid a cautiously optimistic market mood as Chinese data came in better than expected. Chinese Industrial output growth slowed to 7.5% YoY in February, a tad more robust than estimates. Retail sales and growth in property investment also slowed — but still beat consensus, while the rate of expansion in total fixed-asset investment comfortably outpaced forecasts at 12.2%. Still, CNY was pressured in the APAC session following the PBOC’s weaker than expected CNY fixing. The pause in the dollar’s rally also came as US Treasury yields steadied after Monday’s session saw US yields jump across the curve, with markets at some point fully pricing in seven 25bp rate hikes this year. 2-year yields climbed by 11bps, while the 10-year jumped 14bps. The move from yesterday was notable as it wasn’t echoed throughout other asset classes, with both equities and commodities declining. Yesterday’s talks between the US and China offered positive assessments, with the White House calling discussing substantial while Beijing mentioned the word “constructive”, although details were left empty. Today, the FOMC will start its two-day long meeting before announcing its latest policy decision tomorrow evening. USD moves may be more limited in the build-up to the release.


Monday’s session saw the Canadian dollar fall by more than a third of a percent against the US dollar throughout North America’s trading session, despite a total dearth of notable events on the economic calendar. Peace talks between Russia and Ukraine were viewed by markets as a positive development for the future of the world’s energy supply, pushing oil prices lower and taking CAD and other commodity currencies like AUD and NZD along for the ride. An improvement in Canada’s yield differential from the US helped the loonie staunch the bleeding as Canadian 30-year bond yields rose by 14.4 bps, the biggest 1-day change in over three months. Turning to today’s data releases, we’re scheduled to receive housing starts and factory sales from StatCan at 12:30 GMT, along with OPEC’s monthly oil market report later in the day. In the background, loonie traders will continue to focus on peace talks and in turn, moves in crude prices.



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