Weekly currency news: US wage growth disappoints; dollar dives
The US dollar has opened the week on weak footing after diving to three-week lows last Friday, following the release of weaker than expected US wage growth data on Friday. These sluggish wage pressures on inflation have dampened hopes that the Federal Reserve will ramp up its rate hike pace and has hurt demand on the dollar.
In The UK, the pound opens on the defensive, with investors wary about the Brexit discrepancies within the UK Cabinet, heightened by the resignation of the Brexit secretary David Davis over the weekend.
With the Brexit and the global trade tensions on the spotlight, this week we will also have some interesting events, especially in the UK where the Q2 Gross Domestic Product and BoE Carney’ s speech, might have a relevant impact on currency volatility.
Currencies last week
- EUR/USD recovery extends to three-week highs nearing 1.1800
- GBP/USD: testing fresh highs above 1.3300
- EUR/GBP: in range between 0.8800 and 0.8900
- USD/JPY: upside attempts limited below 111.00
Main events this week:
In the US calendar, the most relevant event will be Thursday’s Consumer Prices Index which is expected to have posted another six-year high at 2.9%. This will add reasons for the Federal Reserve to accelerate its rate hike path and might help the dollar to resume its uptrend.
The Eurozone calendar opens on Monday with Draghi’s speech at the ECON Hearing on the European parliament. Although the speech is not expected to be focused on monetary policy, Draghi’s comments can always have some impact on euro volatility.
The most important day in the Eurozone calendar, however, will be on Thursday. Early in the morning, Eurostat will release May’s industrial production which is expected to have picked up after April´s decline.
Later on Thursday, the ECB will release the accounts of their last monetary policy meeting. The Bank disappointed the markets with a particularly dovish message after the meeting which sent the euro tumbling. The interest of these accounts, therefore, will be to assess whether there are some dissenting voices within the committee.
In, the UK, on Tuesday we will have the release of a string of indicators, with special interest on the Gross Domestic Product. After the slowdown witnessed in the first quarter, diverse BoE officials are confident that the economy rebounded in the Q2, which will set the conditions for an August rate hike. This outcome would have a bullish impact on the pound while, on the other hand, a weak GDP would increase negative pressure on the sterling.
On Wednesday, BoE Governour Carney’s speech will attract the attention. His comments about the results of the second quarter’s GDP, released on the previous day, and about the bank’s plan to hike interest rates might have a relevant impact on the pound.
The most relevant event in Japan will be May’s machinery orders figures, an advanced indicator of industrial activity that might have a moderate impact on yen volatility.
On Wednesday, the Bank of Canada is expected to raise interest rates by 25 basis points to 1.5% to ease inflation pressures, as consumer prices recently reached the 2% target level. In this context, if the Bank finally does not deliver the expected rate hike, we might see the Canadian Dollar depreciating across the board.