Weekly currency news: US dollar rises on upbeat US payrolls
The dollar appreciated moderately last week, as the escalating trading tensions between the US and China continued gripping risk appetite and a strong US non-farm payrolls reading strengthened the case for a Fed rate hike at the end of the month.
The euro traded lower for the second consecutive week, while the British pound ticked up, with the investors relieved by the higher prospects of a post-Brexit agreement with the EU.
This week the focus will be on the interest rate decisions of the European Central Bank and the Bank of England although we will have other interesting indicators in the calendar, like the UK Gross Domestic Product or the US Consumer Prices Index.
Currencies last week
- EUR/USD: retreats below 1.1600
- GBP/USD: on recovery, testing 1.3000 area
- EUR/GBP: reversal from 0.9100 extends below 0.9000
- USD/JPY: attempting to regain 111.00
Main events this week:
In the US calendar, on Thursday, the Bureau of Labor Statistics will release the US Consumer Prices Index data. Inflation is expected to have eased in august although the core CPI is seen unchanged at 2.4%. Only two weeks ahead of a key Fed monetary policy meeting, a sharp decline on inflation might cast doubts about the bank’s intentions to hike rates and, possibly weigh on the US dollar.
On Friday, the focus will be on the US Retail Sales figures. Retail consumption posted a sharp increase in July, suggesting that the economy started the third quarter on strong footing. Another positive reading in August would confirm that trend and might add buying pressure on the dollar.
In the Eurozone calendar, on Wednesday, Eurostat will release July’s Industrial Production, which is seen picking up after a significant contraction in June. Another disappointment might increase concerns about an economic slowdown in the third quarter, which might increase euro shorts.
The most relevant event in the Euro Area will be the ECB’s monetary policy meeting, on Thursday. Although the bank discarded interest rate hikes, at least for the next 12 months, political pressures to normalize monetary policies are starting to build up. In this context, the interest will be on Draghi’s press conference, to assess whether there is any change in the bank’s forward guidance.
In, the UK, on Monday, National Statistics will release the UK Gross Domestic Product figures for the month of July. UK economy expected to show an improvement that might support pound’s recovery.
On Tuesday, the focus will be on the UK ILO Unemployment report. With the jobless rate at long-term lows, the focus will be on the earnings component. The pound needs a strong increase in salaries that would add pressure on the BoE to keep hiking rates.
On Thursday the BoE will release its monetary policy decision. After hiking rates in August, the bank is expected to stay pat. Without a press release scheduled after the decision, the main interest of this event will be on the results of the voting.
On Friday BoE Carney’s speech will have an especial interest after the bank’s interest rate decision. His views about the economic outlook and the bank’s monetary policy might have some impact on the pound.
The Japanese calendar will be thin last week. The only event worth mentioning would be the Industrial Production, which is expected to have posted a sharp improvement in July, although the impact on the yen is likely to be subdued.