The British pound whipsawed against the majors at the start of the week, plunging sharply from 1.5251 to 1.4785 against the dollar before settling around the 1.50-mark by afternoon trading. Political uncertainty in the UK was the primary catalyst for the steep sell-off in the sterling. Meanwhile, the greenback was softer against the euro and the Canadian dollar as traders pushed US equities higher, with the Dow Jones up by 0.72% and the Nasdaq improving by almost 1.5%. Crude oil came under pressure in the New York session, retreating beneath the $79-mark to slide to $78.87.
The economic reports released at the start of the week moved the foreign exchange markets, particularly a sharply better than expected reading in Canada's GDP data. The Canadian economy expanded at its fastest pace since 2000 with fourth quarter GDP printing at 5.0%, outpacing consensus estimates for growth of 4.1% compared with an upwardly revised growth rate of 0.9%. On a quarterly basis, the economy posted a robust 1.2% expansion compared with a revised 0.2% increase.
The US reports saw January personal consumption, personal income, PCE and the February manufacturing ISM index. The personal consumption figure printed higher at 0.3% while the personal income reading was lower than expected at 0.1%. The February manufacturing ISM report posted its seventh consecutive monthly expansion, printing at 56.5, albeit less than market expectations and down from 58.4 from January.
This week will feature monetary policy announcements from the RBA, BoC, ECB and BoE. The Reserve Bank of Australia is anticipated to hike interest rates by 25-basis points to 4.0% while the Bank of Canada, European Central Bank and the Bank of England are expected to stand pat.
The key highlight will be the US employment figures, due out on Friday. Traders will closely scrutinize the non-farm payrolls report and the unemployment rate for February for signs in improvement in the beleaguered US labor market. The unemployment rate is expected to creep back up in February to 9.8% versus 9.7% from January. Meanwhile, the non-farm payrolls are seen posting another 20k loss of jobs.