There could be trouble ahead – 13th March 2017

There could be trouble ahead – 13th March 2017

The US Dollar was left frustrated on Friday when the US non-farm payrolls number came in a net 54,000 more than forecast however, the frustration was due to analysts predicting an increase 190,000 in February. Because of this there was a negative reaction to what were, in all fairness, good numbers. The US Dollar lost an immediate third of a cent to the Euro and starts this morning a cent lower on the day against the common currency.

Although the outliers on Friday were the stronger South African Rand and the weaker Norwegian Krone the main battle was between the soft US Dollar and the firm Euro. The Euro strengthened by one US cent on a story about higher interest rates from the European Central Bank. “Sources told Reuters that some ECB policymakers had raised the possibility of a rate hike before the end of QE”, said Reuters. It wasn’t much but it was enough to send Sterling four fifths of a Euro cent lower. Not that Sterling needed any outside hindrance; UK output data on Friday morning had shown industrial production falling by 0.4% in January while manufacturing production was down by 0.9%.

Although there are no ecostats to speak of today, the coming week brings a raft of potentially earth-shaking events and decisions. Wednesday will be a big day with the Dutch election, the FOMC rate hike and, probably, the US budget outline and a vote on the debt ceiling.

From a market point of view the US budget is arguably the most important of those. What Mr Trump wants and what Congress allows him to have are not necessarily the same thing, even though the administration and both houses carry the Republican banner. The (tea) party is not renowned for its support of borrow-and-spend policies. Moreover, the debt ceiling, which caps US government borrowing, will come back into play on Wednesday unless Congress votes to lift or suspend it again.

Slightly further down the road, G20 finance ministers and central bankers will meet on Friday in Baden-Baden to discuss trade. The draft communiqué apparently no longer pledges to “refrain from protectionism”.