After this week’s US labor market statistics, all eyes will be on inflation figures the following week. The figures will be keenly monitored in the lead-up to the FOMC meeting on July 25-26. Inflation numbers for China will also be made public. Tuesday will provide employment numbers for the United Kingdom. Recent central bank decisions will be announced by the Reserve Bank of New Zealand and the Bank of Canada on Wednesday.
Here’s the lowdown for next week:
Friday’s report of a 209,000 gain in nonfarm payrolls fell short of forecasts for the first time in 15 months. After Wednesday’s encouraging ADP data, a pleasant shock was anticipated. Market participants anticipate that the Federal Reserve (Fed) will raise interest rates by 25 basis points at its meeting in July, despite the fact that economic growth has slowed.
U.S. inflation data, which may affect expectations of a Fed rate move, is coming next week. The June CPI and PPI reports will be announced on Wednesday and Thursday, respectively. Inflation is forecast to increase by 0.3% monthly and fall from 4.0% to 3.1% annually, while Core Inflation is forecast to fall from 5.3% to 5.0%.
On Friday following NFP, the US Dollar Index fell substantially, and it ended the week near 102.25, down from a high of over 103.00. Higher US rates did not help the greenback. The 10-year yield finally climbed over 4.00% in late May, and it has been there since then.
The Euro/Dollar exchange rate climbed back over 1.0950 towards the end of the week, breaking above its 20-week Simple Moving Average. The Euro has to break above 1.1000 early next week if further increases are to be possible. The pair gained ground as bond rates in the Eurozone (EZ) rose. The EZ does not have any significant reports due next week. The minutes from the most recent meeting of the European Central Bank (ECB) will soon be made public. Pricing in a rate rise of 25 basis points in July is accurate.
After a significant increase on Thursday and Friday, the GBP/USD closed the week at its highest level in over a year, above 1.2800. The current level of 1.2850 is near the pair’s yearly high. UK employment figures are due out on Tuesday, with GDP figures following on Thursday.
In retreating from near the probable intervention point around 145.00 to the 142.00 range, USD/JPY finished its worst week in months. The Japanese yen had the best performance of any G10 currency.
The US dollar was weak against the Canadian dollar on Friday as the Canadian economy generated 60,000 new jobs. Expectations that the Bank of Canada would raise interest rates by 25 basis points at its meeting next week were bolstered by the number. The pair retreated from monthly highs at 1.3400 to lows around 1.3250.
On Friday, the AUD/USD rose in response to the weakening US dollar, reaching a short-term resistance mark at 0.6700. Next week, Australia won’t be releasing any crucial statistics. However, attention will be focused on China’s inflation data on Monday and trade statistics on Thursday. On Wednesday, Governor Lowe of the Reserve Bank of Australia will give a speech.
On Friday, the New Zealand dollar rose against the US dollar to a high around 0.6220. Next Wednesday, the Reserve Bank of New Zealand will have a meeting to discuss monetary policy. Expect rates to remain at their current level of 0.5%.