Weekly Currency News: U.S. employment dampens rate hike hopes
5 June 2016 · 3 min read
The dollar moved in range during most of the week, on the back of higher or lower expectations of an imminent Fed rate hike, to plunge at the end of the week, hammered by a downbeat Non-Farm Payrolls report that has slashed the expectations of more monetary tightening any time soon.
The pound remained well bid supported by a series of EU referendum polls in the UK, which are showing an increase of the support for the option to remain in the EU.
Last week in currency markets
- EUR/USD: rallies beyond 1.1300 after NFP
- GBP/USD: bounces up at 1.4400, nearing 1.4600
- EUR/GBP: regains lost ground and approaches 0.7800
- USD/JPY: plunges to one-month low at 107.00 area
- USD/CHF: retreats below 0.9800
Main events this week:
In the U.S, the main event will be Fed Yellen’s conference, on Monday. All eyes will be on Yellen, especially after Friday’s disappointing Non-Farm Payrolls report. If the Fed chair maintains the hawkish tone of previous speeches the dollar could regain lost ground, on the contrary, a cautious turn might increase negative pressure on the greenback.
The Eurozone calendar opens on Tuesday, the first quarter’s Gross Domestic Product. According the preliminary reading, euro area economy advanced at a 1.5% pace; an upward revision of these figures might increase demand for the euro.
On Thursday, all eyes will be on ECB president Draghi’s conference. After the release of the Eurozone GDP, the main focus will be on the Bank’s economic and inflation perspectives. Draghi’s comments about the near-term economic outlook might move the euro in either direction.
On Wednesday, the Office for National Statistics will release the UK manufacturing production figures. After two months of downbeat factory output figures, the sterling would need a strong reading to regain investors confidence; another decline in manufacturing production might add selling pressure on the GBP.
On Thursday we will have the release of the UK Trade Balance data. The UK trade deficit narrowed in March for the first time in the last three months. The pound would need further improvement on its trade balance to regain the upside path.
The Japanese calendar opens on Tuesday with the leading and coincident indexes, an analysis of different Japanese indicators. The main focus of these indexes would be to assess the impact of the global economic uncertainty and yen strength over the Japanese economy. Negative readings on these indexes could have a moderate impact on yen strength.
Later on Tuesday the Japanese Cabinet Office will release the Q1 GDP final estimation. Japanese economic growth surprised in April, thus, we might see a relevant upward revision of the first quarter GDP.
On Wednesday, the focus will be on the Eco Watchers Survey, a research of the current situation and the outlook of the Japanese economy. A sharp deterioration of the Japanese economic perspectives might have a negative impact on the yen.
On Tuesday, the Reserve Bank of Australia will release its monetary policy decision. The Bank trimmed interest rates to all time lows in May, thus we do not expect any action next Tuesday, although market sources warn about a dovish statement, that might dampen AUD strength.