- Friday’s US Non-farm Payroll print was stronger than expected and pushed the US dollar higher against its G10 peers and raised doubts over whether the Fed will be able to cut interest rates twice this year. The gain of 272,000 jobs in May was considerably above expectations and pushed EURUSD to test support at 1.0850. The single currency has dropped further this morning after French President Emmanuel Macron called a snap election in an attempt to thwart the rise of his far-right rival Marine Le Pen. EURUSD dropped through 1.0750 where it is currently consolidating.
- The US remains centre of attention in the coming days as markets look forward to the latest inflation report on Wednesday. Declining energy prices are likely to be a welcome relief for both US consumers and the Fed, with markets looking for a drop in headline inflation to 0.1%, down from the previous recording of 0.3%. Wednesday also sees the latest FOMC decision, with officials concluding the June policy meeting which may be the most pivotal of the year. The publication of the latest “dot plot” will likely indicate two cuts of 25 basis points, down from the three cuts suggested in March.
- The pound softened on Friday after the above consensus US labour market data, with GBPUSD consolidating in the low 1.27’s this morning. UK data in the coming days may give markets clues on the timing of the first interest rate cut from the BoE, with tomorrow’s jobs data expected to show that pay growth remains sticky. Wednesday’s GDP print is likely to suggest that the pace of economic activity is cooling. An August interest rate cut from the BoE is currently pencilled in but we have a lot of data and a general election to further cloud the decision.
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