Market Overview

Sterling surges broadly today on news that UK Prime Minister Theresa May could trigger Article 50 for Brexit this week. The House of Commons is set to debate the Brexit bill today and there is hope for passing the bill unamended. The House of Lords has already approved two amendments to the bill last week, in particular to grant the Parliament a "meaningful vote" on the final agreement. Passing the of bills in Commons today would set the stage for May to start' her plan for a so-called "hard Brexit". And the announcement could happen as soon as tomorrow. GBP/USD is trading above 1.22 at the time of writing, comparing to last week's low at 1.2133. EUR/GBP is back at 0.872, comparing to last week's high at 0.8786. While Sterling recovers today, it's still holding below near term resistance against Dollar and Euro. Thus, it's maintaining bearish outlook.

Dollar weakens broadly today as markets await a busy week ahead with four central bank meetings. Fed is widely expected to hike interest rate by 25bps this week. However, such expectation should be fully priced in, traders are looking through the FOMC meeting and turning cautious. In particular, Fed's updated Summary of Projections (SEP) and the monetary policy outlook for the rest of the year would be crucial to Dollar's trend in near term. Technically, the dollar index could dip further towards 100.66 key near term support before FOMC announcement on Wednesday.

The set of strong non-farm payroll data from US should have finalized the case for Fed to hike interest rate this week. Dollar was indeed given a boost over last week and ended strongly. Nonetheless, the greenback was firstly overwhelmed by strength in Euro, and secondly retreated on profit taking. Overall, Euro ended the week as the strongest major currency as supported by upbeat comments from ECB president Mario Draghi as well as rate speculations. Dollar followed as the second. At the other end, Sterling was troubled by worries over the fading impact it depreciation last year on the economy, uncertainties over Brexit terms, and uninspired by UK budget. The pound ended as the second weakest major currency next to Kiwi.

Dollar weakens against Euro, Aussie and Canadian in early US session despite solid non-farm payroll report. The selloff is, at this point, seen as a sell-on-news move. Canadian dollar is supported by its own job data. The set of NFP should have done nothing to alter Fed's decision to hike interest rate next week. Nonetheless, without a surge in wage growth, the report doesn't add to the case for more than three hikes this year. Focus will turn to next week's FOMC meeting, with new economic projections.

Dollar is trading as the strongest major currency for the week as markets await employment data from US. The general consensus is that barring a disastrous non-farm payroll report, Fed will still hike interest rate in the FOMC meeting next week. It would be a big blow to the credibility of Fed if they don't deliver after the chorus of hawkish messages. Nonetheless, the NFP numbers, including the headline job growth and wage growth, are still important for Fed to determine the policy path for the year. FOMC members generally maintained the expectation of three rate hikes this year. But now that the first hike will likely be done next week, there is indeed possibility for four hikes should the economy perform well with boost from US president Donald Trump's expansive policies.

Euro hesitates initially after ECB kept monetary policies unchanged today as widely expected. Markets seem to be unsure about the relatively slight revision in 2018 and 2019 inflation projections. Nonetheless, the overall cautious yet positive tone in president Mario Draghi's press conference is giving the common currency some support. EUR/JPY took out 121.32 resistance earlier today and stays firm. EUR/AUD is also extending recent rebound. At the same time, while EUR/USD rebounds, it's bounded in recent range of 1.0493/0630 and maintains a neutral outlook. EUR/GBP breached 0.8694 temporary top earlier today but lack follow through momentum. Euro traders would likely turn their focus back to politics once the impact from ECB fades.

Euro trades mixed as markets await ECB rate decision and press conference. The common currency trades in red against Dollar but weakness is limited so far. EUR/USD is bounded in range of 1.0493/0630 without a clear near term direction yet. ECB is widely expected to keep policies unchanged even though headline inflation finally hit the 2% target for the first time since 2013. Political uncertainties in Eurozone will keep policymakers' hands tight. And the uncertainties include elections in France, the Netherlands and Germany. Also, the deal with UK on Brexit is basically unknown at this point.

Dollar jumps sharply in early US session on much stronger than expected job data. ADP report showed that private payroll grew by 298k in January, comparing to consensus of 184k. Prior month's figure was also revised up from 246k to 261k. The data affirmed general expectation of a solid non-farm payroll report to be delivered this Friday. And that would solidify the case for Fed to deliver the highly anticipated rate hike next week. Also released in US session, Q4 non-farm productivity was finalized at 1.3% while unit labor costs at 1.7%. From Canada, housing starts rose 1k to 210k in February. Building permits rose 5.4% mom. Labor productivity rose 0.4% qoq in Q4.

Sterling weakens broadly yesterday and is trading as the second weakest major currency for the week at the moment. The House of Lords in US passed an amended bill on Brexit yesterday after having the highest turnout since 1831. The vote was passed by 366 to 268 to add addition condition to the so called "European Union (Notification of Withdrawal) Bill". That demands a guarantee of "meaningful vote" by the Parliament on the outcome of Brexit talks. And it's seen by analysts as securing veto power on any final agreements. The bill will now return to the House of Commons for deciding whether to accept the Lord's amendments. The debate could probably held on next Monday.

Dollar maintains overall gain in early US session in spite of weak trade data. Trade deficit widened to USD -48.5b in January versus expectation of USD -47.0b. That's a 9.6% rise from December's USD -44.3b and the largest figure in five years. Imports jumped 2.3% totalling USD 240.6b. Export, one the other hand, rose 0.6% to USD 192.1b. From Canada, trade surplus widened to CAD 0.81b in January. In the currency markets, Aussie remains the strongest major currency for today but momentum is unconvincing. Fresh selling is seen in Sterling as markets are starting to position for the Brexit negotiation, which should be triggered by the end of the month by prime minister Theresa May.

Yen pared back some gains and turned mixed as risk aversion recedes. Dollar also trades mixed as traders await fresh directions. On the other hand, commodity currencies recovered in general and sentiments stabilized. Mild weakness is seen in Sterling into European session but that's yet to be confirmed. In other markets, Nikkei stays soft for most of the day and ended down -0.18% at 19344.15. That followed profit taking pull back in US overnight as DJIA closed down -0.24% at 20954.34. Gold stabilized at around 1225 and turned sideway after dipping from 1264.9 since last week. WTI crude oil also stabilized at around 53.

The markets trade in mild risk aversion today and the sentiments sent Yen broadly higher. Meanwhile, Dollar regains some ground from Friday's profit taking pull back. The greenback stays supported by firm expectation of a March Fed hike. Nonetheless, the moves in the forex markets are relatively limited. Politics has been a stronger drive in the forex markets, as well as others since late last year. This view is shared by the BIS too as seen in it's quarterly report. For the moment, US fiscal policies, French elections, Brexit negotiations, as well as some geopolitical development like North Korea's firing of missiles will stay as important market drivers. Dollar will look into Friday's job report for sealing the case for a Fed hike..

The Japanese Yen jumps broadly in Asian session today on risk aversion as North Korea fired four ballistic missiles into nearby waters. Some analysts pointed out that the missile tests reminded the markets of the unpredictability of Kim Jong Un leadership. Japan prime minister Shinzo Abe warned that the missile launches "clearly show that this is a new level of threat" from North Korea". Nikkei responded by trading down around -0.5% at the time of writing and stays in red for the whole session. Yen surges against all most currencies today. In particular, USD/JPY's rejection from 114.94 near term resistance since last Friday maintains it's neutral outlook for the moment. Released in Asia, Australia TD securities inflation dropped -0.3% mom in February. Australia retail sales rose 0.4% mom in January, in line with consensus.

Dollar strength dominated the forex markets most of the time last week as speculations of a Fed hike in March heated up. Markets were also relieved as US president Donald Trump's first address Congress didn't deliver anything dramatic. Stock indices surged to new record high, taking yields and Dollar up too. Nonetheless, as most of the positive factors in greenback were priced, traders took profit on Dollar long positions after Fed chair Janet Yellen's comments. And more importantly, Euro staged a U turn after polls showed that far-right French president candidate Marine Le Pen lost ground, thus reducing Frexit risks. Euro has indeed ended as the strongest major currency, followed by Swiss France and Dollar. On the other hand, Canadian dollar ended as the weakest on the sharp pull back in oil price.

Dollar stays firm against most major currencies on speculations of Fed March hike. Nonetheless, the greenback trades lower against Euro as EUR/USD defended 1.0493 near term support. Fed fund futures are pricing in more than 77% chance of a March hike after a wave of hawkish comments from Fed officials. The focus will now turn to Fed chair Janet Yellen's speech, as well as that of vice chair Stanley Fischer today. Traders would be eager to get confirmation on their expectations. Meanwhile, next Friday's non-farm payroll report could be the final piece of data policymakers would watch before FOMC meeting on March 14/15.

US equities pared back some gains overnight on profit taking after a strong run. DJIA closed down -112.58 pts, or -0.53%, at 21002.97. S&P 500 dropped -14.04 pts, or -0.59%, to close at 2381.92. Treasury yields, on the other hand, extended the rally with 10 year yield hitting at high as 2.505 before closing at 2.489. 30 year yield hit as high as 3.101 before closing at 3.082. While yields staged a strong rebound this week, it should be noted that both 10 year and 30 year yield are still bounded in medium term range set since December.

Dollar strengthens further in early US session after strong employment data. Initial jobless claims dropped -19k to 223k in the week ended February 25, below expectation of 245k. More importantly, that is the lowest level since March 1973 and indicates persistent healthiness in the job market. The four-week moving average dropped to 234.25k, down from 240.50k, hitting lowest since April 1973. Continuing claims rose 2k to 2.07m in the week ended February 18. The greenback is boosted by increasing speculations of a rate hike by Fed this month. Technically, the greenback took out near term resistance level against Sterling and Canadian Dollar earlier this week. While it's still limited below corresponding resistance against Euro and Yen, AUD/USD is following and broke a near term support level today.

Strong risk appetite boosted US markets to new record highs overnight. DJIA jumped 303.31 pts, or 1.46%, to close at 21115.55. S&P 500 rose 32.32 pts, or 1.37%, to close to 2395.96. NASDAQ also gained 78.59 pts, or 1.35%, to end at 5904.03. All three indices closed at records. Positive sentiments also pulled treasury yields higher with 10 year yield rose 0.105 to close at 2.463 and revived underlying bullishness. Dollar was boosted by increased speculation of March Fed hike as the Dollar index hitting at high at 101.97. The break of 101.76 in the dollar index confirmed resumption of recent rebound from 99.23. However, development in the currency markets doesn't warrant decisive momentum in the greenback yet. EUR/USD is held above 1.0493 support, AUD/USD above 0.7605 support. USD/CHF is limited below 1.0140 resistance and USD/JPY is held below 114.94 resistance. The strength in the greenback is more apparent in GBP/USD and USD/CAD only. More evidence is needed to confirm bullishness in the greenback.

Dollar continues to ride on speculation of March rate hike and positive response to president Donald Trumps' Congress address. Released from US, personal income rose 0.4% in January while spending rose 0.2%. Headline PCE accelerated to 1.9% yoy but missed expectation of 2.0% yoy. Core PCE was unchanged at 1.7% Yoy, below expectation of 1.8% yoy. ISM manufacturing will be a key piece of data to look at and strong reading could give Dollar's rally more fuel. Fed will also release Beige Book economic report in the afternoon. For the time being, the greenback will like stay firm. Technically, 1.0493 support in EUR/USD and 114.94 resistance in USD/JPY should be watched.

Dollar strengthens broadly as markets took US president Donald Trump's address to Congress positively. Dollar index is back at 101.60, comparing to yesterday's low at 100.78 and is having key near term resistance at 101.79 in sight. Strength in greenback is most notable against Canadian Dollar, which was dragged down by oil price yesterday. On the other hand, the Japanese Yen is sold off broadly today on return to risk appetite. Asian indices are generally higher with Nikkei gaining nearly 1.5% at the time of writing. Focus will now turn to economic data from you, including personal income and spending, and ISM manufacturing, to solidify the strength in Dollar's rebound.