The Aussie could extend its gains next week unless the RBA’s monetary policy meeting minutes on Tuesday convey a surprisingly dovish message or the Australian employment numbers on Thursday disappoint expectations. From the United States, next week’s key data include retail sales on Tuesday and industrial production and some housing market data on Wednesday.
Ahead of the Bank of England’s Super Thursday, the pound has found some much-needed support. It had fallen viciously for three weeks and the selling gathered pace ever since the Bank of England Governor Mark Carney strongly hinted at the prospects of no interest rate rises this month, owing to weakness in UK data.
Today’s main event risk for the dollar, and potential market shaker will be the outcome of the Federal Reserve’s meeting, which is widely expected to conclude with monetary policy left unchanged. Although May’s FOMC meeting will not include a press conference or fresh economic projections, investors should not be quick to expect the meeting to be a “non-event.”
While we were focused on developments on the East side of the Atlantic last week (including the ECB meeting), the market’s focus is shifting westwards this week, with the May Federal Reserve meeting set to conclude tomorrow and the always-impactful Non-Farm Payrolls report on Friday.
In January 2015, the Swiss National Bank, in a move that took everyone by surprise, decided to remove the then floor of 1.20 in the euro/Swiss franc currency pair exchange rate, despite repeatedly promising to defend that level at all costs and for as long as necessary. Rates literally tanked more than 2,000 pips in a matter of minutes as the franc skyrocketed. Fast forward just a little more than three years...
Today’s economic calendar signals that the recent move in the Euro has stretched its limits; Business Confidence data from all regions and most importantly the German Ifo read missed while Case Shiller Housing, Consumer Confidence and New Home Sales all beat expectations in the United States.
Just a couple of weeks ago, the dollar was languishing in the doldrums. This was in part due to that disappointing US jobs report which helped to lower expectations for aggressive rate hikes from the Fed and partly because of trade war concerns. Well, since then, the markets’ expectations over short-term rate rises have been on the rise again as geopolitical tensions abated and incoming data has been mostly positive.
This week was all about the pound; next week could be all about the euro. The pound’s rally came to an abrupt halt as economic data from the UK disappointed expectations and after the Bank of England Governor Mark Carney warned that a rate rise in May was not a forgone conclusion. The resulting rally in the euro/British pound (EUR/GBP) currency pair initially kept the EUR/USD supported.