The FTSE opened mildly higher on the final trading day of the week, trading ahead of its European peers. The stronger start comes after Wall Street finished higher, despite Trump confirming the steel and aluminium tariffs were due to begin in 15 days. The fact that he was giving “real friends” Mexico and Canada exemptions from the tariffs went some way to easing trade war fears.
Boosting stocks across the Asian session was news of a thawing of frosty relations between North Korea's Kim Jong Un and President Trump, who are now set to meet by May. This represents a huge turnaround in the geopolitical atmosphere; just 6 months ago the tit for tat war of words between the two leaders meant a nuclear war looked closer than it had for decades and now six months later the pair could be sitting round the same table. The news boosted risk sentiment overnight, encouraging investors to buy into riskier assets such as shares, whilst selling out of traditional safe havens such as gold and the Japanese yen
USD/JPY rallied overnight and is currently trading 0.5% higher at 106.50. Investors will now turn to the US non-farm payroll report to see if the dollar bulls can remain in control.
NFP in Focus
The US NFP report is the final big risk event in an eventful week. Expectations are for 205k jobs to have been created in February, slightly higher than January’s 200k. Meanwhile average earnings are forecast to have increased by 0.2% in the three months to February, a slight move downwards from January’s 0.3%.
Market participants are heading into the release with a rate rise by the Federal Reserve at the next meeting in March, 100% priced in. A slight miss rom this data is not going to change the Fed’s mind. In fact, it would take some seriously awful reading, such as just a 50k headline figure and wages declining for the Fed to rethink March’s hike.
Therefore, a slight miss on today’s figures is unlikely to generate any serious selling off of the dollar. On the other hand, an upbeat print could see the dollar extend gain across the board heading into the weekend.
So, what are the chances of a surprise to the upside?
Most the data across the month including ADP payrolls and consumer sentiment have pointed to a better than forecast NFP. However, possibly one of the most important indicators, the ISM non-manufacturing numbers have indicated that job creation in the dominant service sector has slowed.
A surprise to the upside could see USD/JPY push higher towards 107.9 before gains extend towards heavy resistance at 109. A horribly soft print could see the pair trade back to recent lows at 105.25.