Trump and Carney in the Spotlight- Focus on the Dollar and the Pound

It’s not been a quiet week in the markets, with the markets having had to decipher the latest FOMC meeting minutes and implications, Trump’s meeting with Chinese Premier Xi, ECB monetary policy, a busier economic calendar and in case that’s not enough, U.S military action on Syria on Thursday.

U.S military strikes have muddied the waters for the day ahead, the unknown being whether the strikes were a one off or the start of a campaign to oust the Assad regime and what implications there will be on relations between Russia and the U.S.

Risk aversion is telling with European equities kicking off the day in the red, with gold spot up 1.05% at the time of the report and WTI surging 1.70% through the early part of the day, the bounce resulting from concerns over supply disruption from the region.

The markets were focused on the 2-day meeting between Trump and Chinese Premier Xi, with U.S nonfarm payroll and wage growth figures scheduled for release this afternoon already playing second fiddle to Trump.

We can expect communication from the U.S administration to be the key driver through the European and U.S sessions, with the markets now looking for direction on the administration’s intentions in Syria and of course, the outcome of the meeting between the two heads of states. Concern over U.S foreign policy and trade in particular will be the markets area of focus, though any hint of a more aggressive approach to North Korea will also weigh on market risk appetite, even more so after the events on Thursday.

With the markets having to wait for news from the Oval Office, there will be focus on macroeconomic data through the day, key data out of the UK including February’s trade data and industrial and manufacturing production figures

We have seen the pound bounce around over uncertainty on whether the BoE will be shifting from its current neutral monetary policy position and this morning’s data will certainly provide more direction, positive numbers, which would be in line with or better than forecasted, likely to fuel expectations of the BoE shifting to a more hawkish position on monetary policy.

ECB president Draghi managed to drag the EUR on Thursday ahead of the ECB monetary policy meeting minutes and with BoE Governor Carney scheduled to speak this morning, any guidance on monetary policy will certainly influence the pound, any moves off the back of this morning’s UK data likely to be relatively muted ahead of Carney’s speech.

With the pound taking the limelight through the morning session, focus will then shift across the pond to this afternoon’s nonfarm payroll and wage growth figures. Expectations are for the numbers to be on the positive side, following Thursday’s solid labour market figures and Wednesday’s ADP numbers, any 200k plus figures likely to increase pressure on the FED to begin selling off assets sooner rather than later, though wage growth will need to play a supporting role.

The markets may have been looking to call it a day after this afternoon’s stats, but with the Trump-Xi meeting concluding with a working lunch, volatility may well persist late into the U.S session, with news on the outcome of the 2-day summit and the administration’s guidance on military intentions over Syria likely to follow this afternoon’s stats.

The EUR will be taking a back seat through the day, despite solid stats out of Germany this morning, with Germany’s trade surplus widening more than forecasted and industrial production seeing another sizeable uptick in February, following January’s revised 2.2% rise.

At the time of the report, the Dollar Spot Index sits at 100.71, up 0.04% on the day, with cable relatively flat at $1.24611 ahead of today’s data and Carney speech, though the day is unlikely to end at these levels, with Trump and Carney likely to drive the respective currencies through to the close, economic data contributing.