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April 2, 2016

NFP report helps Dollar turn the corner, WTI drops on news from Saudis

NFP report helps Dollar turn the corner, WTI drops on news from Saudis

The losing streak of US Dollar against major overseas currencies halted after upbeat economic figures released by US labor department sparked off substantial demand on greenback. After Fed Chair Yellen scattered hawks with overly dovish commentaries on prerequisites for rate hikes, Dollar went into steep decline which slowed down only today.

Non-Farm Payroll change showed 215K jobs were added in March though median analysts estimate was 205K jobs. Average hour earnings increased 2.3% vs 2.2% anticipated mainly because of minor unemployment rate growth – 5.0% vs 4.9%. We can’t say labor data was too strong and could be the trigger for some substantial labor market changes in US but its release results in unprecedented volatility burst and spurred mighty U-Turn in Dollar pairs especially in EUR/USD.  The pair tumbled for Friday peaks of 1.1433 by 90 pips to 1.343   gradually returning to the growth after traders shrugged off from abrupt selloff.

 

Screen Shot 2016-04-01 at 3.41.59 PM

Here what’s happened with EUR/USD

Other USD pairs had  similar backlash on news from US, GBP/USD plunged 1.03% from 1.4327 to 1.4175, managed to rebound to 1.4215 level, AUD/USD fell from 0.7676 to 0.7616 bouncing back to pre-NFP level.

Manufacturing ISM report released after NFP outstripped the expectations with 51.8 points in March vs 50.7 points expected. Report shows manufacturing industry in US is set for further expansion.

As US economy continues to show consistently positive changes, Fed chair will be probably urged to retreat or at least review her posture towards rate hike. As major part of the board voted for earlier rate hike,  further buoyant development  in US will possible foster the change to hawkish rhetorics on  next Yellen conference.

The statement of Saudi Arabia prince that output cap accord is unfeasible without Iran consent was a bolt out of the blue for commodity markets. The hope that OPEC and Non-Opec countries will freeze output on January levels fueled upward movement of Oil prices. Crude prices erased weekly gains turning bearish despite optimistic figures released by EIA in Wednesday. WTI and Brent tumbled more than 2.5%, headed for testing of $35 level.

On next week Dollar is expected to extend bullish momentum  fueled by speculation of earlier rate hike. Eroded confidence on commodity markets left Oil without driver for growth, so further declines are anticipated.

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