Market spotlights for next week

Short week came to an end earlier, with all major markets closed for Easter holiday and little going on since Thursday US afternoon. Dollar gathered some strength in this last session, after the GBP/USD reached a fresh multiyear high and EUR/USD advance up to its weekly high, supporting the idea much of greenbacks’ strength was due to profit taking and short covering ahead of the long weekend. Both European currencies trade a handful of pips below their year highs, but with completely different macroeconomic stances and outlooks: here is a short review of where they are standing, and what to expect for next week.

Europe 

Regardless what fundamental traders may think, the EUR is ruled by its bullish trend and macro data has little impact on it. Over this past week we have learned that European economic reality is still jittery, with inflation still falling in the region and even ECB’s janitor hitting the wires with the grim determination of down talking the strengthening currency, so far failing.  At this point, investors remain unlikely to sell the common currency unless the ECB backs up its rhetoric with action, and that won’t be unveiled until upcoming May meeting. 

For the upcoming week, main attention will center on Consumer Confidence and PMI readings,these last probably with more chances of moving the market: if the readings through the area continue up ticking, the common currency will likely get enough support to challenge again the 1.3900 area against its American rival, also advancing against weakened yen.

United States

The US is finally seeing some light at the end of the tunnel, with data showing a nice decrease in weekly unemployment claims, strong retail sales readings and inflation ticking up a bit. Overall this means the FED will maintain its path of tapering QE and won’t be surprises in that front in the upcoming days. One may wonder then, why then the dollar remains subdued against most rivals and market players are not running to price in upcoming movements; the true is they already did, and now need “something else” to go for the greenback, read rate hikes or at least a date. 

Durable goods orders and PMIs data will be the main readings of next week, and positive numbers may boost the greenback in the short term, thus won’t be enough to reverse the still ruling bearish trend particularly against European rivals. 

United Kingdom

In the UK, unemployment rate down to 6.9% was the main reason of Pound soaring this week: data has been exceeding expectations again, and a rate hike turns into a real possibility before the year end, something unthinkable for other major economies still struggling with growth.

The Bank of England Minutes will be the key next week, despite no surprises are expected. However, market players will be waiting to hear any tip on what’s next for the Bank and when. As hawkish the Minutes and the economic outlook, as sooner the Bank will be ready to move rates and therefore more attractive Pound will become.