Alpesh Patel's NEWSLETTERPRO - Euro and Pound gain over the jobs report, the focus now turns to Janet Yellen’s speeches this week

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© Alpesh Patel

The jobs report on Friday missed expectations for the second month in a row but Dollar’s losses were not that severe. The US currency fell against the Euro and the Pound but not at a manner that would constitute a sell-off. The Dollar was lower against its major peers but stock markets extended their previous gains.

The 113k jobs added on January is less than the 180k figure expected but it seems like investors focused on the positive parts of the report. The unemployment rate continued falling, reaching 6.6% and also average hourly earnings and labor participation increased. To sum up, even though this report shows a slowdown in recovery in the US, the fact remains that the economy is still on a path of growth, a slightly slower growth maybe but still growth.

The Euro ended the day slightly higher against the Dollar. The European currency gained almost 100 pips versus its American counterparty over the jobs report but this was after it had suffered losses earlier in the day when the German Constitutional Court reviewed the constitutionality of ECB’s Outright Monetary Transactions program. This is the program that allows the European Central Bank to purchase bonds issued by Euro-zone member states in case of emergency. The court decided that the matter should be handled by the European Court of Justice in Brussels but the fact that they discussed the issue drove Euro lower.

The Pound had a less volatile day than the Euro and also ended the day higher again the Dollar, gaining substantial ground after the job report’s release. Cable traded up to 1.6400 and over the early Asian session is making its way towards 1.6450.

Now, for the day ahead we expect volatility to remain subdued as there are no important news scheduled for release but this can’t also be said for the whole week. Tomorrow the new Federal Reserve President, Janet Yellen, will be delivering her first speech to the House and on Thursday she will be speaking to the Senate. These would be excellent opportunities to listen to what she plans to do next with the tapering agenda as the unemployment target is at hand but growth in the US is sluggish. Her comments will act as forward guidance for the markets and we expect the Dollar to react to her remarks.

The Pound will also be at risk on Wednesday as the Bank of England will release its Inflation Report and we have seen that this particular report always acts as a vehicle for the Bank to hint markets on their future plans. Growth in the UK is still there but as we’ve seen recently its pace is slowing down, as the Industrial and Manufacturing Production data confirmed on Friday. What is the Bank of England prepared to do about that? We will discuss potential options over our next reports.

No significant events for today, major news will start coming in tomorrow

As we mentioned above today the Economic Calendar is empty of significant events and the only news worth taking note of is the Euro-zone’s Sentix Investor Confidence index that is scheduled for release early this morning. The report is expected to show a decline in investors’ confidence for the current month but with the recent gains in the Euro there’s room for a surprise higher. Either way, its impact on the Euro is expected to be minimal. As we discussed above the main events of the week are expected down the road, starting tomorrow with Yellen’s speech to the House and the Bank of England’s Inflation Report on Wednesday.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

9.30

EUR

Euro-zone Sentix Investor Confidence

Medium

10.1

11.9

 

TECHNICAL ANALYSIS & LEVELS

EUR/USD

GBP/USD

FTSE 100

Gold

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