Forex traders saw extreme volatility throughout the week as several global developments impacted the market. Middle East violence, a possible euro-zone interest rate hike and continuous concerns regarding unemployment in the US have been driving the markets for the last several days.
First and foremost, the continued violence in Libya has brought the price of crude oil well above $100 a barrel. Investors continue to fear that the unrest in the Middle East will continue to spread, and may possibly affect other oil producing countries. Worries that supplies could be threatened are the main catalyst for the steep rise in prices. Analysts are warning that unless a certain degree of calm is restored to the region, the price of oil is unlikely to come down in the near future.
In addition to oil being affected by the upheaval in Libya, safe haven currencies have received a boost at the beginning of the week as investors sought out more stable assets. The Swiss franc in particular has proven to be the currency of choice for risk- averse traders. On Wednesday, the USD/CHF pair dropped well over 100 pips, reaching as low as 0.9200.
The euro dominated currency trading on Thursday. Following the news that the euro-zone's minimum bid rate will remain at 1.00% for another month, ECB President Trichet made the announcement that interest rates may go up in April. Once the statement was made, the euro turned decidedly bullish and moved up against virtually all of its main currency rivals. The EUR/USD went as high as 1.3965, while the EUR/CHF spiked almost 170 pips to reach the 1.3017 level.
Finally, Friday's US Non-Farm Payrolls figure, scheduled to be released in 2 hours' time, is forecasted to show substantial growth in the American jobs sector. With the EUR/USD pair already approaching the 1.3400 level, a positive Non-Farm figure is likely to cause the pair to drop before markets close for the week. That being said, the Non-Farm figure is notoriously hard to predict. Should it come in below the expected 191K, the EUR/USD could break 1.3400.