Talking Points:
All Eyes on US May’s US Employment Report into the Week-End
US Dollar to Rise if Payrolls Increase Tops Consensus Forecasts
High-Yield FX May Suffer Most if US Data Bolsters Fed Outlook
Currency markets are likely to look past a round of second-tier economic releases in European trading hours to focus on the much-anticipated US Employment data set. The report is expected to show nonfarm payrolls rose by 215,000 in May, marking a bit of a slowdown from April’s 288,000 increase. The unemployment rate is expected to tick higher to 6.4 percent after dropping to a four-year low of 6.3 percent in the prior months.
The US Dollar turned sharply yesterday in anticipation of the release, dropping 0.44 percent on average against its leading counterparts to produce the largest single-day decline in two months. Softer labor-market data threatens to cast doubt on continued normalization of Federal Reserve monetary policy, warning that the central bank may opt to slow the process of “tapering” QE asset purchases or delay subsequent interest rate hikes.
US economic news-flow has increasingly improved relative to expectations since early April however.That hints analysts are underestimating the vigor of recovery from the downturn in the first quarter, opening the door for upside surprises. Such a result is likely to bode well for the greenback, sending the benchmark unit higher against most of the majors. Higher-yielding FX may be particularly hurt in this scenario stimulus reduction bets weigh on broader risk appetite. We remain short AUDUSD.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
23:30
AUD
AiG Performance of Construction Index (MAY)
46.7
–
45.9
23:50
JPY
Official Reserve Assets ($) (MAY)
1283.9B
–
1282.8B
0:00
NZD
QV House Prices (YoY) (MAY)
8.2%
–
8.4%
5:00
JPY
Leading Index (APR P)
106.6
106.2
107.1
5:00
JPY
Coincident Index (APR P)
111.1
110.8
114.5
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
6:00
EUR
German Labor Costs (QoQ) (1Q)
–
0.9%
Low
6:00
EUR
German Labor Costs (YoY) (1Q)
–
2.0%
Low
6:00
EUR
German Trade Balance (€) (APR)
15.1B
16.4B
Medium
6:00
EUR
German Current Account (€) (APR)
15.6B
19.5B
Low
6:00
EUR
German Imports (MoM) (APR)
0.8%
-1.1%
Medium
6:00
EUR
German Exports (MoM) (APR)
1.3%
-1.8%
Medium
6:00
EUR
German Industrial Production (MoM) (APR)
0.4%
-0.5%
Medium
6:00
EUR
German Industrial Production (YoY) (APR)
2.7%
3.0%
Medium
6:30
AUD
Foreign Reserves (A$) (MAY)
–
62.1B
Low
7:00
CHF
Foreign Currency Reserves (MAY)
–
438.9B
Medium
7:15
CHF
Consumer Price Index (MoM) (MAY)
0.2%
0.1%
Medium
7:15
CHF
Consumer Price Index (YoY) (MAY)
0.1%
0.0%
Medium
7:15
CHF
CPI – EU Harmonized (MoM) (MAY)
0.1%
0.1%
Low
7:15
CHF
CPI – EU Harmonized (YoY) (MAY)
0.2%
0.1%
Low
7:15
CHF
Industrial Production (YoY) (1Q)
–
0.4%
Low
8:30
GBP
Trade Balance Non EU (£, Mn) (APR)
-3150
-3190
Low
8:30
GBP
Total Trade Balance (£, Mn) (APR)
-1500
-1284
Low
8:30
GBP
Visible Trade Balance (£, Mn) (APR)
-8650
-8478
Low
8:30
GBP
BoE/GfK Inflation Next 12 Mths (MAY)
–
2.8%
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EUR/USD
1.3277
1.3444
1.3552
1.3611
1.3719
1.3778
1.3945
GBP/USD
1.6585
1.6687
1.6754
1.6789
1.6856
1.6891
1.6993
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Source: Daily fx