The euro found itself bid yesterday as some hawkish ECB comments suggesting a first rate hike towards the end of 2019 may be too late. We saw the rate curve increase probability of a September 2019 rate hike to 80% from about 65%. That wasn’t the only good thing for the single currency, data through this morning was also supportive with German factory orders and retail PMI’s both posting solid signs of growth. The USD has been facing selling for much of the week, and while perhaps the holiday week that’s in it may be playing a part, there just hasn’t been much to support a fresh leg higher for the greenback.
Last night’s FOMC minutes didn’t really change things either and while markets and the Fed both still see an additional two rate hikes this year, there are some concerns creeping in about trade policy and how tariffs might impact investment, with some sign that capital spending is being scaled back. The pound found itself facing some selling as comments from Germany suggesting Britain’s vision of Brexit customs is unworkable, no great surprise there. Broadly speaking risk appetite remains quite buoyant, stocks traded higher yesterday and again overnight, most major Asian bourses traded in the green, despite the US tariffs on china “going live”. This continues to be the big story and while markets thus far appear content to shake of the negativity, the larger picture of trade protectionism can only prove negative in the long run. Only time will tell how this plays out and how it impacts US growth.
The USD may well get some reprieve today however and markets look towards the June Non-Farm Payrolls figures. 195k jobs are expected to have been added to the US economy through June and to be honest a big move for USD will likely only occur if there is a big shock factor in this release. Anything between 150k and 280k jobs will more than likely not see too much change in the greenbacks outlook. Hourly earnings at 2.8% will be the key figures for us, anything stronger than that and we’d favour the USD to rally into the weekend. EURUSD remains capped at 1.1725 area for now, although we’ve seen several attempts to press higher, a break will see EURUSD rally up towards 1.18000 area. While downside support continues to be focused back towards 1.1500 area. GBPUSD remains in a tight range 1.3080 up to 1.3280 for and only a break outside that will see a change in direction, for now consolidation in that range is most likely.