The greenback has reached this week fresh year highs against all of its major rivals, most of them even before ECB and US NFP, the two critical fundamental readings of the week: the EUR/USD, despite weak, held until Mario Draghi talked, and then sunk below the 1.2400 mark as the ECB President highlighted that the Council supported unanimously further easing if required to fight deflation, opposing early rumors of an internal conflict.
As for US employment data, the headline disappointed: 214K new jobs were added against 231K expected, something that sounded bad at first glance. Unemployment rate however, fell down to 5.8%, a six-year low, as more people entered the labor force. Wages ticked higher, diluting even further the negative effect of the headline, with the report far from being negative or a sign of a slowdown of the employment sector: overall, it was a good reading. Nevertheless, majors point to close the week with mild intraday gains against the greenback but not far away from the fresh year lows posted this week. In fact, EUR/USD stretched down to 1.2357 while GBP/USD hit 1.5789 before retracing some, and this short term squeeze against the greenback, seems solely some profit taking.
Anyway, from now on, seems we are in a dollar bullish world: the trend is firm in place, and the economic imbalances between the US and its rivals have become larger. That does not mean the greenback will march steadily higher, but pullbacks and retracements will be seen as buying opportunities.
Next week will be lighter when it comes to fundamental data at least in Europe and the US, with the most relevant readings being as follows:
In the UK employment figures will be released on Wednesday, with attention focused for the most in wages once again. Weak wages had been the main concern in the UK so an improvement there alongside with up ticking numbers in jobs creation, should give Pound some intraday support.
In Europe, German inflation on Thursday and EZ one on Friday will be the main movers for EUR crosses: both are expected to tick lower monthly basis, increasing pressure over ECB on applying QE and therefore triggering a selloff in EUR if the readings come out even worse than expected. On Friday, both economies will also release their GDP readings for the third quarter: as usual, market will be trading divergences between expectations and the final results, and given dollar strength, rallies would be stronger if they favor the greenback rather if they favor the EUR.
To wrap up, don’t expect any of the above mentioned to be enough to put dollar under real selling pressure: whilst consolidation is possible, a reversal in the greenback is way too far away and won’t be enough an uptick in European readings to revert it strength.
As for US employment data, the headline disappointed: 214K new jobs were added against 231K expected, something that sounded bad at first glance. Unemployment rate however, fell down to 5.8%, a six-year low, as more people entered the labor force. Wages ticked higher, diluting even further the negative effect of the headline, with the report far from being negative or a sign of a slowdown of the employment sector: overall, it was a good reading. Nevertheless, majors point to close the week with mild intraday gains against the greenback but not far away from the fresh year lows posted this week. In fact, EUR/USD stretched down to 1.2357 while GBP/USD hit 1.5789 before retracing some, and this short term squeeze against the greenback, seems solely some profit taking.
Anyway, from now on, seems we are in a dollar bullish world: the trend is firm in place, and the economic imbalances between the US and its rivals have become larger. That does not mean the greenback will march steadily higher, but pullbacks and retracements will be seen as buying opportunities.
Next week will be lighter when it comes to fundamental data at least in Europe and the US, with the most relevant readings being as follows:
In the UK employment figures will be released on Wednesday, with attention focused for the most in wages once again. Weak wages had been the main concern in the UK so an improvement there alongside with up ticking numbers in jobs creation, should give Pound some intraday support.
In Europe, German inflation on Thursday and EZ one on Friday will be the main movers for EUR crosses: both are expected to tick lower monthly basis, increasing pressure over ECB on applying QE and therefore triggering a selloff in EUR if the readings come out even worse than expected. On Friday, both economies will also release their GDP readings for the third quarter: as usual, market will be trading divergences between expectations and the final results, and given dollar strength, rallies would be stronger if they favor the greenback rather if they favor the EUR.
To wrap up, don’t expect any of the above mentioned to be enough to put dollar under real selling pressure: whilst consolidation is possible, a reversal in the greenback is way too far away and won’t be enough an uptick in European readings to revert it strength.
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