Market Overview

4 March 2016

WEEKLY REVIEW: Next step toward the Fed’s interest rate hike in March?

The positive U.S. labour market data, together with last week's better-than-expected inflation data, could be next step toward further interest rate hike by the Fed.

The U.S. Labour Department released the long-awaited labour market today. The U.S. economy added 242,000 jobs in February, exceeding expectations for a rise of 190,000 jobs, after a gain of 172,000 jobs in January. The U.S. unemployment rate remained unchanged at 4.9% in February, the lowest level since February 2008, in line with expectations.

It could mean that these data would be enough for an interest rate hike in March. But there is a "No" as wages dropped in February.

Comments by New York Fed President William Dudley could mean that Fed officials also remained divided if there was no deterioration in the U.S. economy. He said on Tuesday that the downside risks to the U.S. outlook increased.

I think that the Fed will not raise interest rate in March, but an interest rate hike in April is possible if the U.S. economy continues to improve.

Oil prices were volatile again this week. Oil prices were supported by news that that top oil producers could cooperate to stabilise the oil market continued to support oil prices. Nigeria's petroleum minister Emmanuel Ibe Kachikwu said on Thursday that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members will meet in Moscow on March 20.

Oil prices are likely to remain volatile until a deal on an oil output cut is reached.

Low oil prices weigh on inflation. The European Central Bank (ECB) is likely to add further stimulus measures next week. I would say that the likelihood for further stimulus measures is almost 100%, but I don't think that decision will be a unified decision. The ECB could cut its deposit rate further or expand its monthly asset purchases.

Further monetary policy easing is likely to weigh on the euro.

It is likely that the currency pair EURUSD will rise toward the resistance level at $1.1100 or at $1.1200, if the U.S. economic data will be negative or there will be negative news from China and no further stimulus measures from the ECB (or small volume of further stimulus measures) will be announced.

If the U.S. economic data will be positive and in case of further stimulus measures from the ECB, the currency pair EURUSD may test the support level at $1.0800 or $1.0700.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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