The first week of April started very slow, with markets focusing, of course, on the upcoming Non-Farm Payrolls data on Friday. Monday saw that ISM Manufacturing release, which came better than expectations but brought USD sellers, not buyers.
Ranges held with two exceptions: the USDCAD pair and the USDJPY. The end of the Japanese fiscal year last Friday brought a strong demand for JPY as it strengthened across the board.
For the USDCAD pair, it is normal to move on Monday’s, but the USDJPY is a bit surprising to see it doing that on a Non-Farm Payrolls week. Friday’s data will be decisive moving forward.
Volatility is at low levels these days. No one is willing to take a chance on these markets.
Now that Trump’s administration is in place and things calmed down a bit, traders are looking for potential volatility-triggering events somewhere else. Such a place can be France.
French elections are due this month and uncertainty is rising. While the poles give little chance for the radical LePen, it wouldn’t be the first time to see polls being wrong. If anything, the Brexit referendum and the US Presidential election are telling us polls are misleading.
Looking ahead, the ECB is unlikely to do something this April meeting. Core inflation ticked lower last Friday, making it very difficult for the central bank to keep a hawkish tone.
It is no wonder that inflation dipped if one is considering the Easter to come in less than two weeks. The dip is attributed to this event.
April meeting should see the ECB downplaying the last hawkish statement, and this opens the possibility for the shift in the tone to come only at the June meeting. Until then, plenty of economic data may change the way markets are moving.
The AUDUSD is finally tanking as the RBA kept rates flat. The tone was a dovish one and the AUD moved lower against the Euro, but also against the USD. It could all change by the time the NFP this Friday.
Speaking about the NFP, I am keeping a bullish bias on the dollar here. I wouldn’t be surprised to see new highs on the dollar against the major counterparts.
The problem with the recent lack of volatility can be justified with the SP500 having the slowest start since 1965! It is normal than to see other markets acting in the same way.
However, this can change in a blink of an eye, and the NFP day has the potential of doing that.