US Dollar Gains Momentum Ahead of Fed Rate Hike, But Will February Jobs Report Change the Game?

Friday, March 10, 2023, promises to be an exciting day for global markets as several key economic indicators will be released, providing insights into the health of various economies worldwide.

The US Dollar is on a high on Friday, driven by Chairman Jerome Powell's statements regarding a possible increase in the pace of rate hikes, but it seems to have lost its momentum since Wednesday. Despite Powell's comments on the second day of his semi-annual testimony, stating that no decisions have been made yet, the US Dollar Index experienced a modest retreat, allowing GBP/USD to secure small daily gains. Investors are expected to remain cautious ahead of Friday's February jobs report from the US, as it could significantly impact the market pricing of a 50 basis points Fed rate hike in March.

Gold

The price of gold (XAU/USD) has broken out of its consolidation phase in the Asian session, rising above the narrow $2 range it had been trading in. While the precious metal remains in the $1,825-1,836 range, its outlook is promising as the US Nonfarm Payrolls (NFP) data looms ahead. The US Dollar Index (DXY) is struggling to extend its rebound above 105.35, as weak yields are curbing the appeal of safe-haven assets.

However, it's not all good news for investors. S&P500 futures have taken a significant hit during the Asian session after a sharp decline on Thursday. The reason? US President Joe Biden's endorsement of higher corporation taxes, which has left many investors feeling pessimistic. The prospect of higher taxes is expected to reduce the amount of dividends paid to shareholders and earnings retained by firms, which is understandably concerning for investors.

Despite these challenges, savvy investors should remain optimistic. With the NFP data release on the horizon, the market is sure to be full of exciting opportunities. As always, we encourage you to keep a close eye on market movements and stay informed to make the most of every opportunity that comes your way.

Euro holds steady

As for EUR/USD, it is holding steady just below the 1.0600 level before the European market opens. The pair is defending minor gains amidst a rebound in the US Dollar, as the market awaits the crucial US Nonfarm Payrolls data and ECB Chief Lagarde's speech.

Events of the day

One of the most highly anticipated events is the release of the US Nonfarm Payrolls report for February, which is expected to show an increase of 205,000 jobs, significantly below the previous month's figure of 517,000. Additionally, the Unemployment Rate is expected to remain steady at 3.4%. The data will be closely watched by investors, as a stronger-than-expected reading could increase expectations of an interest rate hike by the Federal Reserve in the coming months.

Another key data release is the Brazilian CPI, which will provide insights into inflationary pressures in the country. The MoM figure is expected to come in at 0.80%, up from the previous month's 0.53%, while the YoY figure is expected to decline slightly to 5.54% from 5.77%.

Meanwhile, the Central Bank reserves of Russia are expected to remain steady at 580.7 billion USD, while the country's CPI figures are expected to show a slight decrease both MoM and YoY. The Canadian labor market figures are also expected to be released, with the Employment Change expected to come in at 10.0K and the Unemployment Rate at 5.1%.

In the UK, the NIESR Monthly GDP Tracker is expected to show a decline of 0.1%, while in the US, the Average Hourly Earnings YoY and MoM figures are expected to come in at 4.7% and 0.3%, respectively.

Finally, the ECB President and several other officials are scheduled to speak, providing insights into the central bank's monetary policy stance, while the US Federal Budget Balance is expected to show a significant deficit of $256.0 billion.