USD strength losing steam – EURUSD back above 1.12 pre ECB
Recently the macro figures coming from the US economy have been supportive of a near term rate increase, but the market got caught off guard yesterday as the Construction Spending came out significantly lower than expected. ISM and Markit manufacturing PMIs came out pointing in each direction, so we cannot conclude anything from that. However, we saw inflationary pressure rising as the ISM Prices Paid came out at highest levels since July 2011. Equity markets were mixed, but have overnight been offered in Asia on back of the weak US figures. Australian Retail Sales disappointed expectations and the Aussie outweighed the positive surprise in the Trade Balance and the positive surprise from yesterday’s GDP figures. Japanese shares tumbled with the Nikkei 225 back in the Ichimoku Cloud, not able to sustaining above.
Today, in the European session, UK Construction PMI will be in focus, expected to post another unchanged expansionary figure at 52 for May. With recent GBP-turbulence, we don’t expect the figure to have that much of an impact in GBP pairs, but the FTSE has broken lower and is once again back below the 50-day SMA.
The ECB will release interest rates at 1345CET, where we and the market do not expect any surprises, but the inflation forecasts will be interesting in light of the recent weak development in the Core Inflation figures.
From the US, the weekly claims will be interesting along with the ADP report, which is a proxy for tomorrow’s Nonfarm Payrolls figure in the US May Job report. US equities have also dipped lower ahead on back of the weak figures from yesterday, and should we see stronger than expected US labour figures, we could be seeing additional downside due to speculation that a rise in employment will add pressure on inflation and hence interest rates. EURUSD closed above the 100-day SMA yesterday and has broken higher this morning. A close above 1.1195 would give scope for a test of 1.1240 and then 1.1280
Have a nice day.
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