Weekly FX Wrap: NFP, NK, NAFTA/Tariffs and ECB all very influential

The monthly US labour report headlined another hectic week and did not disappoint in terms of surprises and subsequent market reaction. Indeed, there was something for everyone given a huge 300k+ payroll gain vs 200k or so consensus (and another 50k+ in back month upgrades for January and December), but a miss on average earnings and downgrade from 2.9% previously (which was the beat that got inflation and Fed rate hike pulses racing in early February). So, extremely volatile and somewhat erratic trade as all the numbers were digested, with Usd/Jpy edging above 107.00 and extending gains made on a combination of less geopolitical and global trade war angst. However, the headline pair eased back below the figure just before huge option expiry interest (around 4 bn) at the strike ran off and may need to close above 106.75-80 (21 DMA) to advance further into a new range (having tested 105.25 ytd lows earlier in the weak when US President Trump’s import tariffs were really stoking protectionism policy fears). Eur/Usd is trying to keep above the 1.2300 level and stem net losses made on the March ECB meeting, as QE guidance was tweaked via dropping the can be increased again if necessary easing bias, but Draghi delivered a more cautious/balanced press conference given that core inflation remains subdued and victory on that front cannot be declared. Conversely, firmer than expected and above new Norges Bank target level Norwegian inflation could well see tightening guidance adjusted to indicate a move sooner than currently projected – Nordea thinks so and has revised its forecast to September from end of 2018 (Eur/Nok now around 9.5750 and close to lows seen last Friday when the Finance Ministry lowed the mandate to 2% from 2.5%). Usd/Cad another big mover and lower after Canada (alongside Mexico) got an exemption from the steel and aluminium taxes, albeit contingent on a NAFTA agreement – currently sub-1.2850 vs 1.3000+ 2018 highs, and despite another disappointing Canadian jobs report (headline employment just below consensus and all down to part-time workers). The Loonie may have benefited from reports of decent cross/Jpy demand, like Eur/Jpy that saw stops tripped on post-NFP buy orders. Back to G10s, the safe-haven Chf also weakened as the week progressed and risk aversion shifted to risk-on sentiment, to sit around 0.9500 vs the Greenback. Conversely, the Aud, Cad and Gbp are all ending Friday on the front foot back above 0.7800, close to 0.7300 and 1.3900 vs the Usd respectively, while the DXY is just keeping its head above 90.000.