US Payrolls and Greece in Focus
In its monetary policy meeting yesterday, the BoE decided to keep interest rates on hold at 0.5%. Moving ahead, markets will look forward to the publication of the meeting minutes later this month to gauge any change of tone by the BoE and to see how the decision was divided among policymakers. The just released survey data on inflation expectations for the current quarter showed that consumers’ expectations rose slightly.
Across the Atlantic, the US non-farm payrolls, along with the unemployment rate scheduled later today, is expected to attract significant market attention. Meanwhile, Greece continues to make headlines, as the cash strapped nation has postponed its debt repayment to the IMF and bundled all four of its June payments together.
Pound Sterling – UK Markets
The just released data showed that inflation expectations among the British public rose from the previous quarter, despite consumer prices falling into negative territory in April. However the Pound showed little reaction to the survey data and continues to trade on a weaker footing against its key peers this morning.
Yesterday, the Bank of England decided to hold its benchmark interest steady at 0.5% and keep the size of the stock of assets bought under the central bank’s quantitative easing programme unchanged at £375 billion, in line with market expectations. Recent economic data has painted a mixed picture about the health of the economy, while a sustained and widespread fall in pricesthat pushed Britain into disinflation territory in April, has raised doubts over the economy’s ability to recover strongly. Meanwhile, whether the decision to hold interest rate was unanimous or not will be revealed only in the MPC minutes released later this month. Following the release of the BoE statement, sterling surrendered some of its gains and moved below the 1.54 mark against the US Dollar.
US Dollar – US Markets
The US Dollar is trading on a stronger footing against the Pound this morning. Market participants now look forward to the most influential data this week, the US non-farm payrolls. The importance attached currently to developments in the labour market makes this one of the most important releases for cues to the timing of an interest rate rise in the nation. Additionally, markets expect the unemployment rate in the US to remain steady at 5.4% for May. After the release of payroll numbers, currency traders are likely to monitor the Federal Reserve Bank of New York President, William C. Dudley’s comments on the economy and the monetary policy.
Yesterday, figures from the labour department indicated that the number of people seeking unemployment claims for the first time fell close to multi-year lows, amid signs that there has been a steady improvement in hiring, reflecting strength in the jobs market. Separately, the IMF indicated that the Fed should delay raising interest rates until 2016 unless there are significant improvements in wage and inflationary growth.
Euro – European Markets
The Euro-US Dollar currency pair is hovering well above the 1.12 mark this morning, recovering from a sharp fall in the early Asian session. Meanwhile, Greece notified the IMF that it will not be paying the loan installment of €300 million that was due today, thus igniting fears of Greece’s possible exit from the Euro zone. The Greek government instead stated that it would bundle all four of its June payment together and pay by the end of this month.
In data released this morning, German factory orders that came out early this morning climbed unexpectedly for April, suggesting a rebound in foreign orders and strong domestic demand. The shared currency snapped some of its losses and spiked above the 0.73 mark against the Pound, following the upbeat numbers. In more positive news, France’s trade deficit narrowed more than market expectations for May. Moving ahead, the second estimate of Euro zone’s first quarter GDP, due later today, will attract market attention.
Other Currencies – Highlights
The Canadian Dollar is trading on a weaker footing against the greenback this morning, with the USD/CAD currency pair trading above the 1.25 mark. Going ahead, markets keenly await employment reports in the two economies later today. A strong job growth is expected in both the US and Canadian labour markets. Markets expect a strong rebound in the number of employed people in Canada for May, while the unemployment rate is anticipated to remain steady at 6.8%.
Yesterday, Canada’s Ivey PMI overshot market expectations as purchasing activity in the public and private sectors accelerated unexpectedly last month, helped by an increase in employment and inventory levels, thus increasing optimism about the nation’s economic outlook. Additionally, the Organization of Economic Co-operation and Development forecast that the Canadian economy will grow moderately at the rate of 1.5% this year, picking up steam later to 2.3% in 2016.