Market In-Review – Negative U.S. Labor Market Data Depreciate Dollar

• EUR/USD adds 0.7% amid rabid weekly session
• Markets extend expectations for Fed keeping rates unchanged
• S&P500 adds weekly 0.3% underperforming France and Germany on negative U.S. sentiment
• Oil prices add USD 0.3 per bbl on diminishing production

EUR/USD gained approx. 0.7% in last week's session. The continued depreciation of the USD in recent weeks seems rather unintuitive given the monetary tightening route, which the Fed should have attended to, by this point. Trying to settle this, it needs to be said that last week's trading session at the EUR/USD was subject to quite a few economic events, acting as potential generators for volatility. Hovering over the Euro are the continued structural difficulties in Europe and the fact that a Grexit is not entirely off the table. The Fed, on the other hand, already exhibited some desire to postpone a rate hike, and seems eager to find evidence to justify that.

After hovering around 1.0890 territory at the start of the session, Monday's EUR/USD trading didn't shake things too much, with the preliminary March Consumer Price Index indicated a 0.3% annual increase of prices, as expected. EUR/USD was seen falling back below 1.08 in Tuesday's morning. This strengthening of the USD may be attributed to anticipation for the Eurozone Consumer Price Data. After the print itself was published, indicating a 0.1% annual deflation, the EUR appreciated somewhat, seeing EURUSD nearly as high as 1.0780. The rest of the day saw fairly negative indications from the U.S. – After dropping from a level of 59.4 in January to 45.8 in Feb, the Chicago Purchasing Managers' Index failed to recover seeing a March print of just 46.3. Interestingly, this didn't do much to depreciate the USD, leading EUR/USD to conclude the day (and March) at a level of 1.0731.

Coming closer to the end of the weekly session, it was time for U.S. data to set the path for markets. The almighty U.S. Nonfarm Payrolls was scheduled for Friday. But preceding it was the ADP Employment Change for March, suggesting 189K jobs added during the month versus analyst expectations of 225K. The USD depreciated by about 50 pips vs. the EUR as that came out.  The real turbulence, however, was the March Nonfarm Payrolls itself, with a mere 126K jobs added vs. analyst expectations for 245K. Unsurprisingly, EUR/USD's gain on that print alone amounted to roughly its weekly increase, concluding the week at 1.0969.

Bad news is 'meh' news

Naturally, much of the weak U.S. data's transmission to the greenback itself was thorough expectations for the Fed's rate hike, or rather the Fed's postponing of one. Judging by sovereign yields of U.S. bonds, those have been quite significant. The yield of the U.S. 2 year gov. bond lost approx. 12 basis points during the week, and that of the 5 year shelled off no less than 18 basis points – to their lowest since February, at 1.2533%.

In a rather blatant contrast to times past, expectations for more dovish Fed haven't trickled down to significantly more optimistic U.S. equity markets. The S&P 500 gained about 0.3% during the week. No nation going insolvent in the Eurozone, on the other hand, gave a little extra push to European markets. The CAC 40 added about 0.8% during the week. Similarly, the DAX is a tad more than 0.8% higher now than it were last week.

Oil prices scored a third consecutive weekly gain, adding close to 30 Cent per bbl and concluding the week at USD 49.14. This owed by large to the U.S. Department of Energy, which reported, on Thursday, of oil crude production being cut from the previous week. It should be further noted that oil experienced a slight slump, Friday, on news of a framework nuclear deal with Iran, with the potential of lifting sanctions and increasing Iranian supply to global oil markets. The recovery of oil prices soon followed, however, after acknowledging the rather prolonged timeline for this to happen, if and when a final deal with Iran will be concluded.