The engine of the EU – Germany, has once again provided Euro investors with an appetite following a string of positive economic data this morning EUR/GBP and EUR/USD are both up at the time of writing following strong export, import and trade balance figures.
It’s of my personal view that this rebound will be short lived for EUR/USD as we approach the Non-farm payrolls this afternoon.
Sentiment around the Euro remains in negative territory as we approach the French elections in April, and whilst Germany continues to hold the fort, other areas of the Eurozone are in desperate need of reform.
The US Dollar however, continues to provide investors with a sense of safety. Economically, it is nearing max employment, inflation is within the FED’s target and Trump’s economic plans, whilst some are controversial, may require the FED to raise interest rates at a faster pace than previously forecasted.
As one of the most traded currency pairs in the world, today’s Non-farm payroll figures will can only go one of two ways;
1. Non-farms outperform market expectations and pressure will mount on the FED to raise interest rates at their next meeting. US Dollar exchange rates may rise moderately due to markets already pricing in a hike for March.
2. Non-farms seriously disappoint market expectations, and the FED return to a cautious outlook for the time being. The value of the US Dollar could fall sharply.
If Non-farms are moderately lower than market expectations, I still envisage a rate hike in March as long as unemployment figures remain intact. The reason being that non-farms do tend to differ significantly anyway.
This in turn will drive the Euro down as investors find further reasons to move funds into the safer haven US Dollar.