Market Sentiment Muted, and Dollar Holds Firm

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Markets are gearing up for ECB Lagarde as a calmer tone overshadows a previous rollout week

After the previous heavy week of data, this one looks much calmer. The market mood suggests that the right boxes are getting tickets for the Fed to move forward with a tightening and rate hike in March, especially after the huge win in the U.S. labor sector, where U.S. jobs reports improved by 467k, more than quadrupling. expectations of 110k in January.

More jobs were created in the hospitality, transportation, professional services and retail trade, despite Omicron pressures and average hourly earnings in January also warming to 0.7%, exceeding expectations, and last month’s figure of 0.5%, suggesting wage growth may begin . play an important role in inflation.

The U.S. economy is firing on all cylinders with a stronger U.S. manufacturing and services PMI, which now makes Thursday’s U.S. inflation data at 13:30 GMT more meaningful for those policymakers looking for aggressive rises to curb rising inflationary pressures.

However, with the global rhetoric of central bank interest rates gaining more fans as the world begins to look at the coronavirus pandemic in its rearview mirror, it will be interesting to see which economies begin to outperform.

US stock futures are flat, and the green dollar remains on the back foot in the forex arena earlier this week. The dollar index stabilized, finding its feet around the 95.40 level after a decline that began in late January from 97.41. Gold is doing well at $ 1,815 / oz due to the 10-year yield rise to 1.92% after Friday’s shock of a U.S. wage report. Keep in mind that the 2-year yield also remains elevated at 1.33%. The high rates kept the pound on its back foot but not so much the euro, especially after the boo and ECB hawkish stances.

The yen maintains its broader neutral-to-bullish tone, but has slipped just below the 115.00 dollar mark intraday, with the Swiss franc strengthening slightly, leading the USD / CHF pair lower to 0.9230.

Sterling resistance and ECB President Lagarde at the central stage

The euro returned to Asian session levels of $ 1.1460, consolidating slightly below its mid-January high of $ 1.1480 after ECB President Lagarde commented last week on a possible rise this year, which raised market tightening expectations. The pair are consolidating in this region ahead of the scheduled hearing, where Ms Lagarde will address the European Parliament’s Committee on Economic and Monetary Affairs at 13:45 GMT. So considering her previous comments, there could be some movements in the euro today.

The pound has recovered 50% from its 60 pip intraday losses and stands at $ 1.3520 after a major fall in the Halifax house price index (HPI), which came in at 0.3%, compared to January expectations of 0.9%.

Despite the highest inflation in 30 years, UK employment is strong, and the economy has handled the Omicron variant well, as shown in the UK retail sales. The first back-to-back rises since 2004 to 0.50% of the Bank of England have failed to sustain the pound at present, with rising cost pressures weighing on households.

The EURGBP cross extended to the 0.8470 level.

Oil and the antipodes forward

The antipodean currencies were the best performers today with the aussie up 0.61% just above 0.7100 per dollar, and the kiwi up 0.31% at 0.6623 per dollar at the time of writing. WTI oil futures at $ 92.40 per barrel returned near Asian trading session levels.

ECB President Lagarde is scheduled to speak at 15:45 GMT.

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