Canada's employment change in focus

With the prospect of a more aggressive pace of Federal Reserve interest rate hikes, the dollar advanced steadily towards the 100 mark on Friday, reaching its highest level in nearly two years against a basket of peers and a one-month high against the euro.

Majors hit new records

According to the minutes of the European Central Bank's meeting released Thursday, the policymakers were not as hawkish but still appeared eager to unwind stimulus. This provided the single currency with a modicum of support near 1.09. At the same time, continued pressure from European energy prices and Russian energy sanctions could mean further declines in EUR/USD.

The dollar also strengthened against the Japanese yen, reaching its highest level in over a week and testing a near seven-year high of 125.1, last seen in March 2022. However, despite the yen's stabilization in the month to date after the previous month's tumble, pressure remains, especially as the BOJ intervenes in the bond market to keep interest rates low.

Gold remains in a tight range

Despite U.S. yields and the dollar moving higher this week, gold seems to have held up relatively well, which points to some inflation hedging and haven buying. The war in Ukraine, rapid inflation, and the COVID-19 pandemic support gold prices. However, the Fed's aggressive stance against inflation, recovering bond yields, a stronger dollar, and eased vaccination restrictions on pandemics will put pressure on gold prices.

The release of emergency reserves leads to a fall in oil prices

Despite some concerns over reduced supplies from Russia due to western sanctions, oil prices on Friday drifted lower and were set to fall around 3% for the week due to consuming countries' planned release of 240 million barrels from emergency supplies.

Analysts said the emergency oil release, amounting to about 1 million barrels per day from May through year's end, might cap price hikes in the short term. However, it would not fully offset the decline if more countries-imposed sanctions against Russia over its invasion of Ukraine.

Events of today

Friday has a light economic calendar with ECB's Panetta speaking later in the day. Investors will also watch Canada's employment change in March after the Bank of Canada hiked rates for the first time in over three years in 2022.

Moreover, ahead of the release of Russia's February inflation data on Friday, the CPI is expected to inch up to 8.8% as the impact of Western sanctions begins to take effect.