Forex Today: Markets shrug off inflation concerns and geopolitics ahead of BOE, jobless claims

Yohay Elam FXStreet

Here is what you need to know on Thursday, May 6:

Investors seem to ignore rising signs of inflation, supply chain issues, and geopolitical tensions around Brexit and China's relations with the West. The BOE may announce tapering down its bond buys and US jobless claims are eyed ahead of Friday's Nonfarm Payrolls. Cryptocurrencies are consolidating their gains.

The US dollar and stock markets are holding up despite growing worries of inflation. The 5-year/5-year breakeven, one gauge of future price rises, is at its highest since 2008. Nevertheless, the Federal Reserve continues stating that price rises are transitory and that the economy still has a "long way to go." The latest comments came from Eric Rosengren and Lauretta Mester on Wednesday. John Williams is set to speak on Thursday.

ISM's Services Sector Purchasing Managers' Index missed estimates with 60.7 points for April, indicating a slowdown due to supply chain issues. ADP's private-sector labor statistics also came short of expectations, adding to lower forecasts for Friday's Nonfarm Payrolls. Weekly jobless claims are set to remain around 553,000 reported last week.

US Services and Manufacturing PMI, ADP Employment: Disappointment is relative

Despite the increase in breakevens, Treasury yields remain stable, and the greenback is steady as well, with EUR/USD hovering around 1.20.

The Bank of England is predicted to leave its interest rate unchanged on "Super Thursday" and substantially raise its growth forecasts. Speculation is mounting about the BOE's bond-buying scheme, with some predicting that Governor Andrew Bailey and his colleagues will announce they are tapering down on bond buys.

Bank of England Preview: Three reasons why Super Thursday could become a sterling suffer-fest

Brexit: Britain is sending gunships to Jersey, as a precaution ahead of a planned protest by French fishermen. The two countries are at loggerheads about using the waters around the island, which is close to the French mainland.

Brits go to the polls in local and regional elections, with Scotland's parliamentarian vote standing out. A majority for pro-independence parties could raise tensions between Edinburgh and London. GBP/USD is clinging to 1.39 amid these three events.

Geopolitics: China canceled commercial talks with Australia, a mostly symbolic move, yet one that reflects growing tensions between the two countries. AUD/USD dropped in response. Foreign minister of the G-7 also singled out China for its practices and human rights abuses.

Coronavirus: Moderna announced its vaccines cope with new strains of COVID-19, providing optimism. On the other hand, India recorded another daily record of infections.

Cryptocurrencies have been stabilizing after an upward move. Bitcoin is hovering around $57,000, Ethereum at above $3,400 and XRP tops $1.60.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD slides below 1.3250 after failing to break through 23.6% Fibo

The GBP/USD pair meets with a fresh supply during the Asian session on Wednesday and moves away from a nearly two-week high around the 1.3275 region, touched the previous day. Spot prices currently trade around the 1.3235 zone, down 0.20% for the day, as traders look to speeches from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh for a fresh impetus.

EUR/USD keeps losses near 1.1400 after soft Eurozone inflation data

EUR/USD keeps the offered tone intact near 1.1400 in European trading on Wednesday, pressured by softer Euronze and German inflation readings and receding bets for aggressive tightening by the European Central Bank (ECB). Traders will take more cues from the US Manufacturing PMI due later in the day.

Gold stays in red below $4,000, awaits Warsh's speech

Gold remains under selling pressure below $4,000, in the red for the third straight day on Wednesday. The Iran uncertainty and Fed hike bets support the USD, weighing on the commodity. Traders now look to Fed Chair Warsh's speech and the US data for a fresh impetus.

ISM Manufacturing PMI expected to signal continued expansion in the US

Attention shifts to Wednesday’s release of the June ISM Manufacturing Purchasing Managers Index, one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy. Markets expect the headline index to remain unchanged at 54.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The European Central Bank Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Federal Reserve, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.