The Forex Week In Review
A quiet data week comes to an end with Forex markets left still digesting the shockingly low May Non-Farm Payrolls number and subsequent down-shift in US rate-hike expectations. Fed Chair Yellen spoke on Monday, much to the disappointment of USD bulls, reiterating that the Fed remain confident in further rate hikes this year although notably she refrained from using the term “in the coming months” which was taken as a signal that the Fed are not encouraged by this latest.
Oil surged ahead this week to print fresh 2016 highs, supported by yet further production outages, as sabotage continues to disrupt production in the Niger delta, and strong demand from refineries. This persistent strength, alongside USD weakness, continues to keep risk markets supported with the S&P 500 hitting new 2016 highs.
Traders now await the June FOMC meeting next week which will prove critical to the medium term USD path. Traders are not expecting the Fed to move on rates at this meeting but bulls will be hoping for a clear signal that July/August remain strong contenders. Failure to provide this assurance is likely to see further sharp USD unwinding.
USD The US Dollar remains under pressure ahead of the June FOMC meeting with the disappointingly low May Non-Farm Payrolls print causing a sharp downshift in US rate hike expectations. Fed Chair Yellen removed the reference to the “coming months” in her recent comments regarding the US rate path. Traders now await the June FOMC meeting with bulls hoping for a clear sign that July/August remain strong contenders.
EUR ECB’s Nowotny said the environment of extremely low interest rates is not the norm, that inflation should be a lot better in 2017, and that he does not expect the oil price to weaken significantly again. Markets remain directionless about Euro due to the uncertainty stemming from the Brexit issue. On the data front, 1Q EuroZone GDP YoY was 1.7% after seasonal adjustments, better than the markets’ forecast 1.5%
GBP Despite having spiked over 180 pips higher in less than a minute on, reportedly due to a “fat finger” trade, Sterling sunk to a three-week low on Monday after two online surveys gave the “Leave” campaign a 4 percent lead. The Brexit storm continues to take priority over economic data which was much stronger than expected, with industrial production rising 2.0% m/m.
JPY The Japanese Yen gained after mixed current account and GDP data which suggested the economy expanded at an expected growth pace, while the current account surplus came in narrower than expected.The government is asking lenders about the possibility of submitting tender offers with negative rates at the ministry’s short-term special accounts borrowing program auctions, according to people with direct knowledge of the matter said
AUD The Reserve Bank of Australia kept interest rates on hold at its Jun meeting and implied it was in no hurry to ease monetary policy further on signs of reasonably strong economic growth.The AUDUSD was the biggest gainer among major currencies, hitting its highest since 6 May. The RBA kept the cash rate at a record low 1.75%, after cutting last month for the first time in one year.
CAD The Canadian Dollar strengthened to a one-month high against the USD after oil prices climbed above $50 a barrel. The loonie’s gains came after Federal Reserve Chair Janet Yellen on Monday called the latest US jobs numbers disappointing and didn’t repeat her recent message that rates could rise again in the coming months.