With both Ireland and the UK off yesterday, many of our readers will be returning to work to the familiarity of a stronger dollar and Trump’s latest tweet. The US dollar index reached new 2018 highs yesterday, somewhat surprising after Friday’s mixed jobs report. The headline figure came in lower than expected with wage growth also lagging even after the unemployment rate dropped below 4% for the first time since 2000. We mentioned in our commentary on Friday that the global issue around falling unemployment and lagging wage growth, and Friday’s figures helped reaffirm this concern. We will have to wait until the inflation figure is released to see if there is any further cause for concern, but as it stands markets are still anticipating a June rate hike.
On Friday we also mentioned how the Eurozone’s latest data had been rather mixed of late. A flurry of Services PMI’s kept up this trend with most major European countries missing markets expectations, while overall Retail Sales also missed to the downside. It was a similar story yesterday with the overall PMI Retail figure coming in below 50 for the first time in 12 months, while German factory orders also showed a drop off of 0.9 percent. This run of data saw the dollar continue its climb against the single currency, reaching a new YTD low of 1.1896. This run of recent soft data has markets weary of the ECB kicking the can further down the road.
It could be a big week for the pound, which has lost its mojo in recent weeks after a May rate hike was taken off the table. Thursday’s MPC meeting should however give us an insight as to where the committee are at in terms of a hike appetite. Expectation is for a repeat of the last meeting, with 2 members favouring a move higher, with the other 5 anticipated to remain.
EURUSD has broken below 1.1900 this morning which looks to put 1.1800 back on the radar. We would need to see a move back above 1.20 to see this trend reversed. While GBPUSD has continued to trade lower this morning approaching its key 1.3500 psychological mark.