The upcoming trading week could prove to be a challenging one, as important economic releases and geopolitical events take place throughout both quarter-end and a holiday-shortened trading week.  It is fairly safe to assume liquidity will be at a premium from midweek onwards, making it particularly tricky to trade not only around US and Canadian trade balance figures on Thursday, but US Non-Farm Payrolls on Friday.  Given market expectations around the first rate hike from the Fed have fragmented since the last FOMC meeting,Friday’s employment report will be closely eyed and set the tone for the greenback in the weeks ahead.  Yellen’s speech in San Francisco before the weekend highlighted that wage growth and price inflation were not necessary to be confident inflation would move back to the Fed’s 2% target over time, though weakness in these indicators could keep the Fed on the sidelines longer than anticipated.  Failure to look past just the headline reading on job creation could put traders on the wrong side of the market, though it is likely heightened volatility due to thin liquidity will create attractive opportunities for medium and long-term hedgers.

Investor sentiment has started the week in optimistic fashion, with global equities on their front-foot after the Governor of the People’s Bank of China hinted further monetary policy easing could be in the cards, as the accelerating drag in the first quarter has raised concern from policymakers.  Governor Zhou said policymakers have scope to respond to the disappointing start to the year, hoping to insulate against a harder than necessary landing as the growth rate tumbles.  The Shanghai Comp rallied 2.62% on its session in response to the stimulus rumors, with the positive price action filtering over to European equities, despite the fact that Greek reform negotiations continue to drag the cash-strapped nation closer to the brink of outright insolvency.

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