The Canadian dollar has posted small gains, trading just below the symbolic 1.25 line in the European session. We could see stronger movement from the currency when US nonfarm payrolls are released later today. The month of March has brought plenty of turbulence to the financial markets, highlighted by the Ukraine-Russia war, which shows no signs of ending anytime soon. The war has caused a massive humanitarian crisis and ruptured relations between Moscow and the West, and clearly, such a grim landscape has taken its toll on investor risk appetite. The Canadian dollar is sensitive to risk, but gained ground in March, as USD/CAD fell by 1.28%. The currency has managed to remain in demand despite heightened risk apprehension, thanks to the Canadian economy, which is a major exporter of oil and other commodities. The ongoing surge in commodity prices has boosted the Canadian economy as well as the Canadian dollar, which earlier this week hit its highest level since November 2021. Canada’s economy rose by a modest 0.2% in January. GDP has now expanded for the eighth month in a row, but the recovery has been hampered by the Covid pandemic. Some parts of the country are experiencing a spike in Omicron cases, which appears to be a sixth wave of Covid. If the government responds by tightening health restrictions, the move will likely dampen economic activity. US Nonfarm Payrolls could affect Fed policy  All eyes are on US nonfarm payrolls, with a consensus estimate of 490 thousand jobs. There is growing talk that the Federal Reserve could resort to salvos of 50 basis points in order to contain hot inflation, and today’s release could have a significant impact on the size of upcoming rate hikes – a print of 600K or higher will bolster the arguments for that the economy is strong enough to withstand a series of 50-base point hikes. USD/CAD technical USD/CAD faces resistance at 1.2588 and 1.2699. There is support at 1.2416 and 1.2355.

Yields on Eurozone government bonds continued to rise this week. This continued a sell-off that began at the beginning of March, triggered by the war in Ukraine. Immediately after the outbreak of war, safe government bonds were still in demand. This turned around relatively quickly, however, as the market shifted its focus to the additional inflationary pressures as a result of the war. Rising commodity prices are the most obvious economic impact of the war, but this could be compounded by additional price pressures from supply shortages, such as the COVID-19 pandemic triggering a shortage of semiconductors, which in turn led to rising vehicle prices. The war will thus both directly increase inflation rates and increase future risks. At the same time, these factors also pose significant risks to the economy. The sharp rise in energy prices is putting a strain on household purchasing power. The economic viability of companies with high energy consumption has been called into question. Supply shortages could lead to production cutbacks or stops. The demand for certain goods and services that have a high share of raw materials could suffer. So, the risks of economic damage are also considerable. We see two reasons why the market is nevertheless focusing on inflation. One is that the impact on inflation is already clear, such as the massive jump of the inflation rate in the Eurozone in March. The other is that the ECB and - even more so - the US Fed are more concerned about inflation. Unlike the US Fed, the ECB is moving very slowly, but the recent decision to taper securities purchases more quickly and possibly end them in 3Q was a step away from the current ultra-loose monetary policy, despite the war. We believe that risks to the economy are currently not properly priced into benchmark German Bunds. Due to the above-mentioned factors and the rise in medium- and long-term interest rates, weaker economic data seems likely during the coming months. This should trigger a countermovement after the sharp rise in yields and lead to a decline in yields for medium and longer maturities. At the upcoming meeting of the ECB Governing Council in mid-April, a verbal dampener for yields could also come from this side. Yields of short-term maturities, on the other hand, should continue to rise, as we expect interest rate hikes in the Eurozone to start in December, but later than the market is currently pricing in. In the US, yields have also risen massively in recent weeks. In contrast to the Eurozone, however, yields on short maturities have risen significantly more than those on medium and longer maturities. As a result, there is virtually no yield difference any longer between the 2-year and 10-year maturity. The market is thus pricing in the peak of the economic and interest rate cycle. The US market thus seems to be better prepared for somewhat weaker economic data. We therefore expect a sideways movement for medium and longer maturities over our forecast horizon. Yields on short maturities should still rise somewhat, but less than the market is currently pricing in. In our view, it is questionable whether US key interest rates will continue to rise in 2023. Download The Full Week Ahead

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As traders reacted to today's US labor market data, the greenback traded broadly higher on Friday. At the time of writing, the EURUSD pair was seen at around 1.1050. According to a recent report, the US economy added 431,000 jobs in March, below the 490,000 expected. However, the February number was revised upward to 750,000 from 678,000. At the same time, the unemployment rate improved to 3.6%, down from 3.8% previously. Finally, the yearly wage growth improved to 5.6% (against 5.5% expected), while the monthly change met estimates at 0.4%. After the data, the CME Group FedWatch Tool showed a 72.5% probability of a 50 bps hike in May, compared to 71% earlier in the day. The support is seen at the 1.10 level, and if not held, the pair might decline toward 1.0950. Alternatively, the resistance remains at the key 1.12 level. If the euro jumps above it, the medium-term outlook could change to bullish.

Summary Although slower than in recent months, the 431K increase in employment in March gives a clearer picture of what remains a solid trend in hiring. The strong pace of hiring is being supported by rising labor force participation but is still plenty strong enough to keep the labor market tightening. The unemployment rate fell to a fresh cycle low of 3.6%, while average hourly earnings growth picked up to 0.4%. While the jobs market is not the Fed'snumber one priority at present, today's solid report supports the prospect of a 50 bp increase in the fed funds rate at the FOMC's May meeting. And the beat goes on The slowdown in hiring in March leaves nothing to be concerned about on the labor front. Instead, the431K increase in payrolls offers a cleaner read on the trend in hiring after the past few months' reports have been affected by unusual seasonal dynamics and the Omicron COVID wave. Hiring continues along at a robust pace that is still more than twice the average of the past expansion. If the March pace were to be sustained, payrolls would be back to their pre-COVID levels in July of this year. Further improvement on the labor supply front supported the resilient pace of hiring. The labor force participation rate rose another tick in March to a fresh cycle high of 62.4%. We expect this trend to continue as the availability of jobs continues to pull more workers into the labor market and lessfavorable household finances in the face of inflation and dwindling fiscal support also give a push. The rise in the labor force (418K) still did not match the jump in the household measure of employment(736K), driving the unemployment rate lower than expected to 3.6%. Employment gains were broad-based across industries and were led by the still-recovering leisure& hospitality sector. Employment in leisure & hospitality rose 112K in March and is now "only" down8.7% since February 2020. Manufacturing employment rose by 38K, including 22 Knew workers in the stretched durable goods industries. Professional & business services, retail trade and construction also saw rock-solid employment gains in the month. Total nonfarm employment is now 1.6 million jobs, or just 1%, below February 2020 levels. Nearly all of these still missing jobs are in leisure & hospitality, health care or state & local governments. Plenty if not most other sectors have seen total employmentregain or surpass their February 2020 employment levels. Download The Full Economic Insights

Equity markets are nudging higher at the end of the week after suffering losses a day earlier, as the consolidation phase continues. This continues to be a very headline-driven market and they're coming thick and fast. Talks between Ukraine and Russia are progressing well, it seems, but things can change rapidly, for better or worse. Until we see a deal, the situation will continue to feel precariously balanced and investors will remain on edge as a result. Claims of a Ukrainian attack on a fuel depot in Belgorod, where further explosions have recently been reported, may ignite further tensions if proven to be accurate. Not that Russia itself has lowered the intensity of its attacks in Ukraine since the negotiations began, of course. Naturally, the Kremlin won't let hypocrisy stand in the way if it wants to escalate the crisis once more. Interestingly, Ukraine is yet to confirm responsibility for the attacks. Eurozone inflation piles further pressure on ECB Inflation in the eurozone hit another all-time high in March, jumping to 7.5% from 5.9% in February. Energy prices are strongly behind the move which isn't going to change any time soon, although price pressures are becoming a little more widespread. The core reading only rose to 3% though, up from 2.7%, which is still way above the ECB's 2% inflation target. The central bank has continued to swim against the tide when it comes to inflation and despite a major shift at the last meeting, continues to be far less hawkish than the markets. Today's data will make life even harder for the ECB which may start to move more in line with market pricing of 40-50 basis points of hikes by year-end if this continues. Another strong jobs report The US jobs report was once again quite strong, even if the headline NFP fell a little short of expectations. The creation of 431,000 jobs is still extremely good at a time when unemployment is falling to 3.6%, which surpassed expectations. Throw into the mix higher participation which the Fed will no doubt be pleased to see as this is one thing that can alleviate some of those wage pressures and it's hard to find fault with the report. As it is, wages are still rising strongly at 5.6%, somewhat offsetting the inflation drag. Ultimately, this means plenty of rate hikes this year and probably more chance of one or two super-sized, the first of which is now heavily priced in for May. Oil falls below $100 on SPR release Oil prices are continuing to fall today, as we await an announcement from IEA regarding the coordinated SPR release following President Biden's decision this week. Unlike on the previous two occasions, markets have responded favourably to the latest release, which is by far the largest ever from US reserves. The timing nicely coincides with the run-up to the midterms as well which I'm sure is merely a coincidence. Whether it has a significant impact in that time though will ultimately depend on the situation in Ukraine. One thing it will do is increase OPEC+ resistance to boosting output, not that it has shown any ability to even deliver 400,000 barrels per day increases in recent months. Compliance increased to 151% in March, from 136% in February, meaning its new slightly higher targets will simply increase the amount in which it will likely fall short in May. At least the group isn't being political in its decision making... Gold eases lower after strong jobs data Gold is a little lower at the end of the week, with the jobs report weighing a little as the dollar strengthened. It doesn't really change much as far as the yellow metal is concerned as it remains range-bound, comfortably above $1,900 and seemingly going nowhere fast. Traders are happy to hold on but in no rush to buy, it seems. Bitcoin failing to capitalise on Monday's breakout Bitcoin accelerated moves to the downside yesterday and has continued to do so again today as it wipes out all of Monday's breakout gains. It now finds itself back below $45,000, albeit still in a fairly healthy position. The cryptocurrency rallied almost 20% from its 21 March lows but rather than capitalise on its break above $45,500 it appears to have induced some profit-taking. It's slipped almost 10% from Monday's highs so it will be interesting to see if traders are ready to pile back in or if they have no faith in the breakout.