Euro zone inflation surged to 7.5% in March, hitting another record high

• The nonfarm payrolls report showed that 431,000 jobs were added last month
• The unemployment rate dropped to 3.6%, the lowest since February 2020
• Eurozone manufacturing growth slowed sharply last month data showed on Friday

Forex market

The dollar rose on Friday, helped by robust U.S. job growth numbers for March that firmed market expectations that the Federal Reserve will increase the pace of interest rate hikes in an effort to blunt rising inflation. 

The nonfarm payrolls report showed that 431,000 jobs were added last month, versus estimates of 490,000, while data for February job increases were revised higher. The unemployment rate dropped to 3.6%, the lowest since February 2020. Another strong print is sustaining expectations for two or more jumbo-sized Fed hikes in the coming months and has added to the momentum driving the dollar higher. 

Economic Calendar

Futures contracts tied to the Fed's policy rate fell after the jobs report, pointing to expectations that the Fed will hike by a half-a-percentage point at each of its next three meetings to deal a more decisive blow to price pressures. That would follow a quarter-point hike on March 16, when the Fed embarked on a new tightening cycle. 

The dollar index, gauges the greenback against six counterparts, including the euro. For the week, the dollar was nearly flat, having rebounded from a midweek decline as hopes over Russia-Ukraine peace talks faded, boosting safe-haven demand for the American currency. Global risk sentiment continues to deteriorate and lift the greenback as hopes for a ceasefire in Ukraine fade. 

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The euro failed to find any support from surging eurozone inflation, which climbed to 7.5% in March, hitting another record high and raising pressure on the European Central Bank (ECB) to rein in runaway prices even as growth slows sharply. We still think that as much as inflation is set to intensify further in the Eurozone, the ECB is likely to wait it out this quarter to see how the bloc evolves with the shock emanating from the war in Ukraine, though we think the ECB is on borrowed time and will need to hike this year. 

The euro was 0.24% lower versus the greenback at $1.10395. The single currency retreated sharply on Thursday after hitting a one-month high earlier in the session, as hopes for a ceasefire in Russia's invasion of Ukraine faded. Peace talks were ongoing on Friday. Another commodity-linked currency, the Australian dollar, rose 0.15% to $0.74965. The Russian rouble has recovered to levels last reached in the days before Russia launched its invasion in February.

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Euro-EUR

The single currency traded lower despite Eurozone inflation surged to 7.5% in March, hitting another record high with months still left before it is set to peak, raising pressure on the European Central Bank to rein in runaway prices even as growth slows sharply. Consumer price growth in the 19 countries sharing the euro accelerated from 5.9% in February. Overall, the EUR/USD traded with a low of 1.0979 and a high of 1.1036 before closing the day around 1.0981 in the New York session.

Japanese Yen-JPY

The Japanese Yen fell as The dollar rose on Friday, helped by robust U.S job growth numbers for March that firmed market expectations that the Federal Reserve will increase the pace of interest rate hikes in an effort to blunt rising inflation. The nonfarm payrolls report showed that 431,000 jobs were added last month. Overall, the USD/JPY traded with a low of 121.16 and a high of 122.41 before closing the day around 122.13 in the U.S session.

British Pound-GBP

The British Pound edged lower against the U.S dollar on Friday and was on track for a weekly loss of around 0.5%, as optimism surrounding peace talks in Ukraine faded, while UK manufacturing growth hit a 13-month low. The S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 55.2 in March. Overall, the GBP/USD traded with a low of 1.3157 and a high of 1.3223 before closing the day at 1.3183 in the New York session.

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Canadian Dollar-CAD

The Canadian Dollar edged lower against its U.S counterpart on Friday, extending a modest weekly decline, as oil prices fell and the gap between U.S. and Canadian bond yields moved in favor of the U.S bonds. For the week, the currency weakened 0.3%, after touching on Wednesday its strongest intraday level in nearly five months. Overall, USD/CAD traded with a low of 1.2462 and a high of 1.2550 before closing the day at 1.2473 in the New York session.

Australian Dollar-AUD

The Australian Dollar has been bumping up against resistance levels as the underlying fundamentals of the Australian economy remain strong. The backdrop of elevated commodity prices and a relatively healthy economic national balance sheet is underpinning the currency. By historical standards, the Aussie is below the long-term average since the float in 1983, while the terms of trade remain at multi-generational highs. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.

Forex VPS

Euro-Yen EUR/JPY

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has lost 0.30%.

Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has lost 0.19%.

Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has lost 0.11%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has lost 0.12%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has gained 0.02%.

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