Banking woes, US NFP to keep volatility high ahead of weekend

Investors remain on edge on the last trading day of the week as they keep a close eye on the performance of regional bank stocks in the US while awaiting the April jobs report. The European economic docket will feature Retail Sales data for April and Statistics Canada will release the labor market data later in the day. With the Federal Reserve’s (Fed) blackout period ending on Thursday, comments from policymakers will be watched by market participants as well.

Safe-haven flows dominated the financial markets on Thursday, helping the US Dollar erase some of the losses it suffered in the Fed aftermath. PacWest Bancorp shares hit a record low after the opening bell on Thursday after the lender announced that it was in talks with potential partners about strategic asset sales. Meanwhile, the Financial Times reported that Western Alliance was also exploring similar options, triggering a selloff in other regional bank stocks as well. Later in the day, Western Alliance shares rebounded after the bank denied the report, calling it ‘shameful’. Early Friday, US stock index futures are up between 0.2% and 0.4%.

Nonfarm Payrolls (NFP) in the US are forecast to rise by 179,000 in April following the 236,000 increase recorded in March. The Unemployment Rate is expected to remain unchanged at 3.5% and the annual wage inflation is seen holding steady at 4.2%.

EUR/USD declined below 1.1000 on Thursday but managed to stage a rebound. The European Central Bank (ECB) raised its key rates by 25 basis points as expected. During the press conference, ECB President Christine Lagarde clarified that they were not going to pause the policy tightening, adding that they had “more ground to cover.” Although Lagarde’s hawkish comments helped the Euro find demand, the risk-averse market environment limited the pair’s upside. In the early European morning on Friday, EUR/USD was trading modestly higher on the day slightly below 1.1050. Meanwhile, the data from Germany showed that Factory Orders slumped by 10.7% on a monthly basis in March, compared to the market expectation for a decrease of 2.2%.

GBP/USD closed modestly higher on Thursday as the sharp decline seen in EUR/GBP helped Pound Sterling stay resilient against the USD. The pair continues to stretch higher early Friday and was last seen trading at its highest level in nearly a year above 1.2600.

USD/JPY fell for the third straight day on Thursday before stabilizing slightly above 134.00 early Friday. Earlier in the day, a magnitude 6.3 earthquake hit Japan’s Ishikawa Prefecture. This development, however, doesn’t seem to be having an impact on the pair’s action.

Gold shined as the go-to safe-haven asset on Thursday and climbed to $2,060 during the American trading hours. XAU/USD retreated below $2,050 early Friday but clings to impressive weekly gains.

Bank of Canada (BoC) Governor Tiff Macklem said in a prepared speech at the Toronto Region Board of Trade that if they start to see signs that inflation is likely to get stuck materially above their 2% target, they are prepared to raise interest rates further. These hawkish comments and a late rebound seen in crude oil prices helped the CAD outperform the USD on Thursday and USD/CAD lost more than 100 pips. The pair trades in negative territory near 1.3500 early Friday. The Unemployment Rate in Canada is forecast to tick up to 5.1% in April from 5% in March with a +20K in Net Change in Employment.

Bitcoin closed modestly lower on Thursday but started to edge higher early Friday. BTC/USD was last seen rising more than 1% on the day near $29,200. Ethereum retreated on Thursday but returned to the $1,900 area ahead of the weekend.