ECB meeting, US Payrolls, and Grexit

The week started with the dollar firming up across the board, as higher inflation readings in the US and comments from Janet Yellen, FED's chair, fueled market's conviction on a soon to come rate hike in the US. The American currency held to its gains against most of its rivals, reaching multi-weeks highs against most rivals, and even a fresh 13-year highs against the Japanese yen. The EUR fought back amid rumors Greece was getting a deal with its creditors, later denied, but held to its gains anyway, until the release of the second revision of US GDP figures early Friday. The data showed the US economy shrank 0.7% during the first three months of this 2015, worse than previously estimated, but above market expectations, pressuring the dollar further against its European rival, albeit not that much against the rest of the major currencies. 

Despite the economic slowdown, the dollar resists amid FED's decision to raise rates depends on inflation and employment. And whilst the first have shown signs of improvements last week, the main report about the second will come next Friday, in the form of May Nonfarm Payroll readings. 

Grexit

Greece debt issues have been in the spotlight all of this past week, with, what a surprise, a lot of jawboning and no definitions. The negotiations between the country and its creditors continue, with Greek's optimism opposing to EU officers discourage. European stock markets sell-off amid concerns the troubled country won't be able to face,  a due payment to the IMF next June 5th of € 300 millions. 

In the meantime, news on Friday showed that Greeks have pulled €5.6bn out of their accounts last month, leaving bank deposits at their lowest level since 2004 on fears of a default. But despite the fears, EU officers have been working on avoiding a default in the troubled country, as Europe can't afford at this point, to lose Greece, as explained several times before. Nevertheless, Greece needs to pay the IMF a total of €1.6bn during June, so a deal must be achieved as soon as next week to actually spook fears of a default and push investors towards high yielders. 

ECB monthly economic meeting

The European Central Bank will have an economic policy meeting on June 3rd, with the ECB's President Mario Draghi, more than comfortable with the ongoing QE announced earlier this year, which means there are practically no changes of a surprise announcement regarding rates or facilities. The focus will then turn to the speech, and market players will be paying close attention to the  ECB’s quarterly staff projections. The Central Bank officers will likely be optimistic on inflation and growth, but will likely reassure that they will keep on buying €60 billion of mainly sovereign bonds, intending to expand its balance sheet by a €1  trillion in total. 

Earlier this month, the EUR got hit by comments from an EU official suggesting the Central Bank may accelerate the path of purchases ahead of the summer, something that if gets confirmed in this week meeting, may see a sell-off in the common currency. 

Nevertheless, I'm inclined to consider the meeting will remain as a non-event ahead of Friday's US employment figures. 

US Nonfarm Payrolls

Following a strong slide in employment data in March, April figures surprised to the upside, as the economy added 223K new jobs, whilst the unemployment rate fell down to 5.4%, partially reverting the negative tone of the greenback, later supported by rising inflation.

The US economy had added far fewer jobs in March, when it recorded the weakest pace of job growth in over the year, creating just 163K new jobs. The economy had previously added average around 240,000 jobs per month for 12 consecutive months, a feat not seen in 20 years. Was March just a kneejerk due to the cold weaker, of will we have another poor reading, considering the latest GDP revision? 

Expectations for May reading are of 224K new jobs added, and a steady unemployment rate of 5.4%, which may not be outstanding, but indeed will keep the FED on the path of rising rates and therefore, support the dollar. However, a weaker-than-expected reading below 200,000 new jobs, will be a hard number to bear with for dollar bulls.