Forex Fundamental Analysis April 2 ~ 7, 2023

We are starting a new quarter, month, and week, so expect renewed enthusiasm in the market as we prepare for the US Nonfarm Payroll on Friday. The entire market will be preparing for the big day on Friday, so pay close attention to market sentiments as we approach Friday morning.

Tradable news events of the week:

The AU Cash Rate is the official interest rate set by the Reserve Bank of Australia (RBA) each month. Economists and financial experts closely watch it as it can directly impact the Australian economy. The Cash Rate is set at either 25 basis points above or below the current market rate, and it can be changed for various reasons, such as to stimulate or cool off economic growth or to adjust for inflation. It’s an important event that affects all Australians, so it’s essential to stay informed about when it’s scheduled and what changes are being made each time.

The RBNZ Cash Rate is the official interest rate set by the Reserve Bank of New Zealand (RBNZ) each month. It’s closely watched by economists and financial experts as it can have a direct impact on the New Zealand economy. The Cash Rate is set at either 25 basis points above or below the current market rate, and it can be changed for various reasons, such as to stimulate or cool off economic growth or to adjust for inflation. It’s an important event that affects all New Zealanders so it’s important to stay informed about when it’s scheduled and what changes are being made each time.

The ADP Nonfarm Payroll is a report released by the Automatic Data Processing (ADP) that provides estimates of employment in the US private sector. It’s released on a monthly basis, usually two days before the more widely-followed US Bureau of Labor Statistics (BLS) release of their nonfarm payrolls data. The ADP report includes estimates of both net job gains and losses in specific industries across America. This data can provide insight into how the economy is performing and it’s watched closely by economists, investors, and other interested parties.

The Canada Employment Change report is a monthly publication from Statistics Canada that provides data on changes in employment levels and other related metrics. It covers both full-time and part-time employment, as well as job openings and key economic statistics such as hours worked, earnings, labour force participation rate, unemployment rate and the Consumer Price Index (CPI). This report is used to track labour market trends in Canada and helps economists make forecasts of future economic growth.

US Nonfarm Payroll is a monthly economic indicator released by the Bureau of Labor Statistics (BLS) that measures the number of jobs added or lost in the non-farm sector. This data is used to measure employment trends and economic growth for both state and national levels. The Nonfarm Payrolls report includes information on the number of jobs created or lost, wages, hours worked, average weekly earnings, aggregate works hours and total payrolls. This report serves as an important indicator of economic health in the US economy.

Weekly Forex Fundamental Analysis Summary

This week, investor optimism prevailed as Q1 came to a strong close. Waning concerns over global and regional banks and hopes for a pause from the Fed boosted risk appetite. First Citizens’ agreement to purchase a significant portion of SVB assets eased banking fears, and M&A deals announced on Monday further fueled the market’s enthusiasm.

Focus shifted away from worries about US banking deposits and tightening financial conditions due to the banking crisis. EU CPI readings showed improvement, while the Richmond Fed data surpassed market expectations. Friday’s PCE data indicated slight softening but did not significantly alter the messaging from Fed officials.

US Treasury yields increased, led by the US 2-year, which rose above 4%. The futures markets, however, were still pricing in a pivot to rate cuts later this year.

Stock volumes declined, and the US dollar remained weak due to strength in the Euro. The NASDAQ neared its early February highs, while the S&P recovered about half of the way to those levels. The S&P gained 3.5%, the DJIA rose 3.2%, and the Nasdaq increased 3.4%.

In corporate news, First Citizens Bancshares’ stock surged after its deal to acquire Silicon Valley Bank’s assets. Carnival reported solid Q1 results and strong bookings performance.

Boeing was boosted by news of plans to increase 737 Max production rates. Infineon’s optimistic Q2 and fiscal year outlook benefited the semiconductor sector, though concerns about China’s Cyberspace Administration reviewing Micron’s sales in China weighed on the industry.

Forex Sentiment Forecast

Considering the current market, here’s what we can expect this week.

• The US dollar (USD) remained weak as investor optimism prevailed, fueled by hopes for a pause from the Fed and waning concerns over global and regional banks. Despite an increase in US Treasury yields, the futures market still priced in a pivot to rate cuts later this year. Overall sentiment is still to sell on rally.
• The Euro (EUR) strengthened due to improved EU CPI readings and reduced worries about US banking deposits and tightening financial conditions. The market’s focus shifted to the region’s economic recovery.
• The Japanese yen (JPY) saw muted fluctuations, with investor sentiment focused on the broader global economic landscape and the impact of central bank policies.
• The British pound (GBP) experienced volatility and is correlating closely with the Euro for the time being.
• The New Zealand dollar (NZD) and the Australian dollar (AUD) benefited from increased risk appetite in the market, as optimism surrounding global economic recovery and central bank policies took center stage.
• The Canadian dollar (CAD) was influenced by fluctuations in oil prices and the broader market sentiment, with investors monitoring domestic economic indicators.
• The Swiss franc (CHF) maintained its position as a safe-haven currency, with its value influenced by global risk sentiment and central bank policies.

I’d recommend to sit on the sidelines until Friday and focus on the NFP. Depending on the ADP release on Wednesday, you may get a change to “price in” the NFP ahead of the release, which may move the market significantly, so you may want to watch out for that.