Monthly US jobs data was the main focus on Friday and added to the theme of confusion as much weaker headline data was offset by strength elsewhere. The dollar weakened slightly, although global growth doubts and a lack of support for other currencies limited the scope for US selling. Sterling was hit by failure to secure any Brexit breakthrough ahead of key UK parliamentary votes this week while underlying Euro sentiment remained fragile on growth concerns.
Pound Sterling (GBP)
In volatile trading on Friday, Sterling registered net losses as political uncertainty undermined confidence. The UK currency briefly spiked higher on reports that the EU had made a new offer to the UK, although gains faded quickly as the UK rejected EU Chief Negotiator’s offer as a repeat of previous ideas which had been ruled out. GBP/EUR declined to near 1.1550 while GBP/USD dipped below the key 1.3000 level. Although there was no breakthrough in talks during the weekend, Sterling stabilized with markets braced for further very choppy trading over the next 24 hours with Brexit rhetoric and rumours likely to dominate trading.
After heavy losses on Thursday following the ECB policy decision, the Euro secured a limited recovery on Friday. There were hopes that a pro-active central bank stance would help support growth later in 2019. A rebound in Italian industrial production also had a positive impact. Markets were, however, skeptical whether the recovery was more than a limited technical recovery from heavy losses. EUR/USD closed around 1.1230 with a slight advance on Monday despite a dip in German industrial output. The Norwegian krone strengthened after stronger than expected inflation data boosted expectations of a March rate hike.
US employment data is the biggest monthly data release and again dominated on Friday. The headline employment increase was substantially weaker than expected at 20,000 for February from 311,000 in January. Unemployment, however, declined to 3.8% from 4.0% which maintained uncertainty over the outlook. Dollar selling was limited given expectations that other major central banks would adopt dovish policies. Fed Chair Powell reiterated that there would be no short-term changes in US interest rates while China’s promise of further support measures provided some relief with USD/JPY trading above 111.00 on Monday.
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