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Disappointing NFP figures renew pressure on the USD

USD

The USD index started to gain momentum through the week amid expectations of strong Non-Farm Payrolls which failed to impress, avoiding any technical breakthroughs on the price and forfeiting previous gains from strong ADP Employment change and Services PMIs. The USD retraced by the end of the week and renewed selling pressure which seems to be driving the greenback during the second week of June.  Additionally, U.S. treasurer Janet Yellen said over the weekend that President Joe Biden should push forward his USD 4 trillion spending plan even if it means higher inflation and interest rates. In terms of data, we expect the most relevant information to be released on Thursday with the Consumer Price Index and Michigan Consumer Sentiment Index.  We will also keep an eye open on any new tension between China and the U.S. in which case, we could see the risk-on sentiment that is driving the USD sell off to be reversed as investors look for refuge in treasuries.

  • On Tuesday (06/08): Good and Services Trade Balance (May) | JOLTS Job Openings (Apr)
  • On Thursday (06/10): Consumer Price Index (May) | Initial Jobless Claims (Weekly)

EUR

The EUR dropped almost 1% against the greenback amid expectations of strong US Non-Farm Payrolls during the first week of June. The disappointing NFP numbers diluted the Bearish momentum in EURUSD which recovered closing 0.49% lower than the beginning of the week. The EUR failed to capitalize further gains as retail sales figures on Friday also disappointed investors releasing 23.9% Vs 25.5% expected year over year. However, this is an interesting week for the EUR as the economic calendar will kick-off Tuesday with Gross Domestic Product and ZEW Survey - Economic sentiments, while the ECB will have a “Monetary policy statement” on Thursday where we might see some tapering on the bond purchase program if the ECB follows the footsteps of the Fed. On Friday we expect the G7 meeting where the discussion will be around the war against COVID and global inoculation initiatives.

  • On Tuesday (06/08): Gross Domestic Product | ZEW Survey - Economic Sentiment (June)
  • On Thursday (06/10): ECB Interest/Deposit Rate Decision | ECB monetary policy statement and press conference
  • On Friday (06/11): G7 Meeting

GBP

Sterling continues to trade against the USD within the three-week horizontal channel, very close to the year highs briefly registered in previous weeks. Cable tried to break the lower bound of the channel amid expectations of strong US unemployment figures which failed to deliver solid results and recovered by Friday last week. However, the U.K. fundamentals continue to support a stronger GBP, as Housing prices outperformed expectations last week registering a solid 10.9% year over year vs 9.2% expected. The British pound has failed to capitalize on further gains against the greenback mainly due to fears that the British government won’t be able to fully open the economy by the 21st of June due to the rising concerns of the latest spike in coronavirus cases, involving the “Delta” variant. Matt Hancock, Health Secretary said that the government is “absolutely open” to delaying the final lifting of U.K. lockdown and that the decision will be driven by the data. This week, we will be monitoring the developments around the opening of the U.K. economy while we wait for the Bank of England interventions on Thursday and U.K data flow on Friday with Industrial and Manufacturing production followed by Gross Domestic Product figures.

  • On Monday (06/07): BRC Like-for-like Retail sales | 
  • On Thursday (06/10): BoE’s Haldane Speech 
  • On Friday (06/11): Manufacturing Production (Apr)| Industrial Production (Apr) | Gross Domestic Product (Apr) | NIIESR GDP Estimate (3M)(May)

JPY

The JPY continued to lose territory against the USD as the Yen suffers from a downbeat economic outlook due to its ongoing struggle to contain the outburst of coronavirus cases and an inefficient vaccination rollout. The state of emergency has been extended until the 20th June ahead of the beginning of the polemic Olympic games scheduled for July. At the moment, the Associated Press estimates that only 2-3% of the Japanese population is fully vaccinated, considerably lower than other major economies which has made the Yen lose its competitive edge in the market. This week we kicked off with a better than expected Preliminary Leading Economic Index (Apr) which has not generated any relevant movement on the pair. Later today Current Account and Gross Domestic Product for Q1 might provide fuel for the pair to move. 

  • On Monday (06/07): Leading Economic Index (Apr) | Current Account (Apr) | Gross Domestic Product (Q1)
  • ON Wednesday (06/09): Producer Price Index
  • On Friday (06/11): CFTC JPY NC Net positions

CAD

The Loonie continues to trade within its three weeks horizontal channel testing year highs for the Canadian Dollar against the greenback. The previous week registered the highest prices in commodities in three years which had been like fuel for the Loonie to continue testing the resistance but it failed to capitalize further gains. Last week, the U.S. unemployment data failed to impress while the Canadian Net change in employment for May registered even worse results, compromising any solid gains for the Loonie to take advantage of the rally in oil.  The unemployment rate rose from 8.1% to 8.2% while GDP recorded a soft 5.6% Vs an expected 6.7% with a revision in Q4-20 9.3% from 9.6% previously released. This week, we expect Imports and Exports for April on Tuesday followed by the Bank of Canada deputy governor Lane's speech on Thursday.

  • On Tuesday (06/08): Imports (Apr) | Exports (Apr) | International Merchandise Trade (Apr)
  • On Thursday (06/10): BoC’s Lane’s Speech
  • On Friday (06/11): Capacity Utilization

MXN

The Mexican Peso traded within a tight range last week, unaffected by the political turmoil and mid-term elections which were carried out yesterday. The results are still coming in, but early estimates suggest that President Andres Manual Lopez Obrador and his governing party Morena will win a reduced majority in the Mexican congress. The elections come amid a spike of violence in the country as a dozen politicians were killed in the build-up to the vote, as well as incidents during yesterday's voting session as five election workers were shot dead and a severed head was lobbed into a polling station. The president has been strongly criticized for the latest surge in violence and his slow progress into fighting the drug cartels while unemployment figures keep increasing, affecting Lopez Obrador’s approval ratings.

  • On Wednesday (06/09): 12-month inflation (May)
  • On Friday (06/11): Industrial output (Apr)

CNY

The onshore Yuan dipped against the USD during the early hours on Monday morning as different market participants increased the demand for USD ahead of several central banks meeting this week. The CNY retraced 0.71% during last week driven by the People’s Bank of China who increased the FX deposit reserves for banks in order to slow down the significant appreciation of the Yuan as well as increasing expectations of strong U.S. NFP figures, which failed to impress the market. The market received trade balance figures from China during the early trading hours of this week, which left room for improvement for the next set of releases. The Consumer Price Index on Wednesday could provide new input drivers and adjust monetary policy from the PBoC.

  • On Monday (06/07): Trade Balance USD(May) | Foreign Exchange Reserves
  • On Wednesday (06/09): Consumer Price Index (May) | Producer Price Index (May)
  • On Thursday (06/10): Foreign Direct Investment (YTD)

BRL

The Brazilian Real rallied 1.25% against the greenback on Friday adding up to a total 3.32% weekly gain driven by the outstanding economic data. The Brazilian economy has shown robust progress reversing the adverse effects caused by the virus, exceeding the pre-pandemic levels of output. However, despite the positive momentum the government electricity sector monitoring committee issued a “water risk” warning report following the reports of the latest rainy season. President Jair Bolsonaro said that Brazil has the worst water crisis ever recorded and there are risks of energy shortages and electricity rationing. The minister of mines and energy, Bento Albuquerque said that for now the possibility of blackouts or rationing are discarded but that the country should look to reduce its dependency to hydroelectric energy.  

  • On Monday (06/07): BCB Focus Market Readout
  • On Tuesday (06/08): Retail Sales (Apr) | IGP-DI Inflation Index (May)
  • On Wednesday (06/09): IPCA Inflation (May) | Foreign Exchange Flows 
  • On Friday (06/11): Brazilian Service Sector Growth (Apr)

Quick Insights

USD: Disappointing NFP figures renew pressure on the USD

USD: Disappointing NFP figures renew pressure on the USD

EUR: Euro to assess Economic Sentiment and GDP ahead of the ECB meeting

EUR: Euro to assess Economic Sentiment and GDP ahead of the ECB meeting

GBP: U.K Government open to extending lockdown

GBP: U.K Government open to extending lockdown

JPY: Japanese Yen suffers from a downbeat economic outlook

JPY: Japanese Yen suffers from a downbeat economic outlook

CAD: Oil prices support the Loonie while unemployment data caps potential

CAD: Oil prices support the Loonie while unemployment data caps potential

MXN: Mexican elections: Andres Manuel Lopez Obrador is set to win a reduced majority in the Congress

MXN: Mexican elections: Andres Manuel Lopez Obrador is set to win a reduced majority in the Congress

CNY: Yuan retraces amid global uncertainty

CNY: Yuan retraces amid global uncertainty

BRL: Strong economic performance shows water crisis

BRL: Strong economic performance shows water crisis

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