Forex Pips: Euro, Swiss Franc, Sterling vs US Dollar
US dollar stayed strong against trading peers in the forex market as traders set new pips target following the release of consumer inflation and employment record.
Jobs figures, released Friday, showed 303,000 new hires were added to the labor market over the month of March. The figure eclipsed expectations for 189,000 jobs created.
It is quite surprising to see EUR trading above 1.08 as United States rates markets have reacted to Friday’s jobs data, but foreign exchange (FX) markets haven’t, said ING. Naira Devaluation Deepens Economic Crisis in Nigeria
However, given that two-year EUR: USD swap differentials are now 150bps in the US dollar’s (USD) favor, the pressure for sub 1.08 levels is clearly building, wrote the bank in a note to clients.
Looking ahead this week, the highlight of the Eurozone’s data calendar will be Thursday’s European Central Bank (ECB) meeting. The ECB is in the much more fortunate position of having a much clearer disinflationary backdrop with which to support an easing cycle, stated ING.
The bank suspected that will drift lower into Wednesday’s US consumer price index (CPI) data and doesn’t see too much Eurozone data of note this week.
Elsewhere, financial markets are keen on a weaker Swiss franc (CHF) at the moment and will be keen to see what Swiss central bank (CNB) President Thomas Jordan has to say in a rare speech on Monday, pointed out ING.
Markets now price 22bps of SNB easing at the June meeting. If, however, the ECB turns more dovish than the SNB — and given the importance of rate spreads to driving the rally — the next leg higher to 1.00 in may be much harder work.
Volatility remains exceptionally low, where traded options prices are dropping towards realized volatility at under 4%, according to the bank.
The prospect of a United Kingdom parliamentary election later this year has had no discernible impact on FX markets so far and is reminiscent of 1997, where a consistent over 20% lead in the opinion polls for Labour was no source of drama for sterling (GBP).
The UK data calendar remains light for the week ahead. There are a few Bank of England (BoE) speakers, however. Monday, there’s Deputy Governor Sarah Breeden and ING will see if she echoes recent remarks from Governor Andrew Bailey that the market is right to price BoE rate cuts this year. She speaks today, For reference, markets currently price 75bps of BoE easing this year. Forex speculators have been assessing recent economic data and looking for signs that the US economy keeps upward trajectory.
