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Federal Reserve Rate Cut Bets and Signs of Weakness in US Jobs Dominate Market Movement

Pound News: Sterling Finds Support in Modestly Resilient UK Services Data

Following days of weak UK data, including surprising contractions in Britain’s manufacturing and construction sectors, the Pound found a little support yesterday as Markit’s services PMI for the nation beat expectations.

Still, despite signs of resilience in Britain’s biggest economic sector, May’s PMIs showed that growth wasn’t much above stagnation. On top of this, political and Brexit uncertainties continue to dominate the Pound outlook.

Most of this week’s notable UK data has been published now, leaving Pound movement to be influenced by potential political news and speculation towards the end of the week.

 

Euro News: Eurozone Political Jitters Keep Pressure on Euro Ahead of ECB Decision

Despite yesterday’s German and Eurozone services PMIs beating projections, investors were hesitant to buy the Euro too much throughout the day, with markets remaining anxious about the European Central Bank (ECB) following Tuesday’s disappointing Eurozone inflation stats.

On top of this, fresh concerns about tensions between the EU and Italy caused some Euro weakness yesterday as the European Commission recommended disciplinary action against Italy over its budget plans and debt levels.

Market focus will be on the ECB today, as well as the following press conference. If the bank takes on a more dovish tone due to weakness in Eurozone inflation the Euro could see weaker performance at the end of the week.

 

US Dollar News: Federal Reserve Chairman’s Comments Knock US Dollar

The US Dollar has seen days of losses since last week, as concerns ramp up about how US protectionism could impact the US economy and interest rates

Investors sold the US Dollar throughout most of yesterday’s session in reaction to Federal Reserve Chairman Jerome Powell’s comments that the bank would act appropriately on monetary policy. This was perceived by markets as the first hint that the bank would consider cutting interest rates, as signs of weakness in US jobs data led to even deeper US Dollar losses yesterday.

With Federal Reserve interest rate cut bets in focus, US Dollar investors are likely to focus on influential data. Today’s trade balance data could cause some movement, but tomorrow’s Non-Farm Payroll report is even more likely to be influential.

 

Canadian Dollar News: CAD Dragged Lower by US Dollar Weakness

While yesterday’s Canadian labour productivity data improved to 0.3% in Q1 as expected, the Canadian Dollar saw slightly weaker performance.

Investors sold the Canadian Dollar alongside the US Dollar. Concerns about US economic slowdown and trade tensions with Mexico have weighed on the Canadian Dollar due to the close trading relationship between the US and Canadian economies.

Canadian Dollar investors will continue to focus on US trade developments through to the end of the week, although tomorrow’s Canadian trade balance data may also prove influential for investors.

 

Australian Dollar News: Fed Bets Keep ‘Aussie’ Resilient despite Weak Australian Growth

Investors remained hesitant to buy the Pound over the Australian Dollar yesterday, despite supportive UK data and the latest Australian growth stats showing that the economy was less resilient in the first quarter than expected.

The Australian Dollar avoided major losses due to broad weakness in the US Dollar. As Federal Reserve interest rate cut bets rose and investors sold the US Dollar, AUD benefitted.

Australian Dollar investors will be reacting to trade balance data today. It could be influential if it paints a surprising picture of how the domestic economy is handling global trade tensions.

 

Upcoming Data

 

Thursday, 6th June

02:30    Australian Trade Balance

07:00    German Factory Orders

10:00    Eurozone Employment Change

10:00    Eurozone Growth Rate

12:45    European Central Bank (ECB) Policy Decision

13:30    ECB Press Conference

13:30    Canadian Trade Balance

13:30    US Trade Balance

13:30    US Non-Farm Productivity

15:00    Canadian Ivey PMI

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

Alastair Archbold

Foreign Exchange Manager

aja@fcgworld.co.uk

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