Outlook on Macro
Traders are lamenting on the lack of volatility in fx markets which could be in for an irregular week in the coming weeks. There appears almost everything a trader could wish for to come up with productive activity in markets. With the geopolitical tensions in the Ukraine threatening to move past into a whole new level, Western leaders are set to fuel more effort pressuring Russia in the coming weeks by further sanctions as the Geneva accord attained very little despite the recent kidnapping of European military observers by pro-Russian separatists.
Financial markets were seen to be complaisant regarding events in recent weeks, however last week in particular saw a flight to a safe level. Moving past from geopolitics, markets will be getting to grips with the most recent Eurozone inflation, with an overall increase to 0.8 % as anticipated.
This in turn might provide the ECB chairman leeway to take a step back from monetary easing rhetoric despite the presence of the threat of a sustained and bleak low inflation on the European economy. Global growth received both a forward and backward look whereas Non-farm Payrolls will also play a major role which experts anticipate may prove to be not as easy as it may appear.
Strong U.S. economic data is presently in continuation to be a positive force for the dollar and there are three large data releases for fx traders to get their hand into with U.S. GDP, the FOMC monetary policy decision and more specifically Non-farm payrolls. The GDP has a great potential to be a volatile repercussion as traders get their first look at the effects that the polar vortex had on expansion in the first quarter.
The expectations is for an annualised 1.3 %, yet there is clearly the high potential for a disclosure both higher and lower which could lead in significant volatility. The recent Fed meeting minutes indicated that the next FOMC decision should be a fairly straight forward narrowing of an additional $10 billion of asset purchases to $45 billion for the month and without a press conference this simply means no opportunity to throw off another contingent error.
Still, Non-farm Payrolls will remain to add volatility to a dollar trade. Hitting the expectation of 205,000 would be seen as a positive indicator for the dollar in itself, while the Fed will likewise be interested in continuing its improvement in the participation rate which revealed signs of bottoming out in recent months.
The dispute regarding gold is presently trading on two primary factors namely; performance of the dollar and the ongoing geopolitical tensions in Ukraine, was brought into the spotlight earlier last week. An initial move lower came as the dollar was bolstered following the better than expected durable goods data indicated that the U.S. consumer was back in fine health after the dreadful winter that had previously impacted on big ticket items sales.
When the news broke that Russia was amassing troops on the Ukrainian border for their alleged military exercises, the gold prices surged $30 higher. The irony is reminiscent of the cold war, with threat of further sanctions and accusations of underground activities that were being made. Furthermore, the risks for investors became much higher and hard asset such as silver, gold and platinum were now regarded as safe havens.