US data to take centre stage
The FOMC meeting minutes that released last week has cemented expectations for a rate hike 14th June. While second estimate for 1Q GDP growth came in higher at 1.2%, the number remains subdued. Incoming soft data (especially disappointing inflation data) has lower our expectations for quicker economic momentum.
This week’s inflations and labour data, and most importantly wage growth, will be key in pricing the Fed next moves. However, the last two consumer price inflation reports highlighted a persistent weakness in core inflationary pressure. This lack of price growth may put the Federal Reserve back on the sidelines, forcing Janet Yellen to slowdown the ongoing tightening cycle. April’s PCE deflator is due for release on Tuesday and is expected to ease further to 1.5%y/y, down from 1.6% a month earlier. A weaker reading could seriously jeopardize the pace of rate normalization beyond the June meeting.
Stay on top of the markets with Swissquote’s News & Analysis
Draghi speaks before European Parliament
The ECB 8th June meeting has become a critical event. With EU economic data continuing to outperform and French legislative elections further removing political risk, the ECB has additional freedom to adjust policy. Traders are listening for the slightest less dovish monetary guidance language from Draghi and the committee. German Chancellor Merkel’s recent complaining that the euro is “too weak because of ECB policy” has publicly increased German dissatisfaction with inflation levels. While it’s significantly too early for actions, we could get a shifting of forward guidance by removing the bias for lower interest rates or additional QE. This shift would be significantly bullish for the single currency.
EUR/USD was moving sideways at around 1.1170 this morning. The economic agenda is very light today; however Mario Draghi’s speech before the European Parliament may trigger some volatile moves later this afternoon.
Political jitters drive ZAR
Anyone that that traded ZAR for an extended period of time should be numb to political and social instability. While the headlines of No Confidence vote against Zuma might have made splash news, we suspect most traders will thinking around the event risk. In our view the current political instability is a binary event both ending with higher ZAR. Should Zuma get impeached, a new and potentially better president will be elected, ZAR positive. If Zuma stay in power, then its business as usual and low volatility and higher interest rates environment will drive speculators back into ZAR.
This morning, USD/ZAR was up 0.35% to 12.9250 as Jacob Zuma apparently survived an attack from ANC’s members to remove him.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold reaches to all-time highs near $2,230, US PCE eyed
Gold price appreciates to all-time highs near $2,230 per troy ounce, attempting to continue its winning streak for the fifth successive session on Friday. However, trading volumes are light as market participants are likely observing Good Friday.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.