General market theme
Price action in the major money markets has been dominated by dollar flows over the past 24 hours but we didn’t see the dollar rally that we would have expected ahead of the Non-Farm Payrolls report scheduled for tomorrow. Instead the US currency treaded water against its major peers as recent data from the UK appeared mixed and the release of the Fed minutes revealed nothing more than a divided committee waiting for fresh news to decide dollar’s outlook. On the back of the Brexit the FOMC is bound to have turned more bearish of course hence the dollar didn’t receive the support we expected but it still might do so ahead of the NFPs as recent indications suggest a robust reading for this month.
Price action highlights
The euro managed to climb above the 1.1100 level for a brief period of time yesterday but the price action lost all momentum and ended the day trading just below this key figure. Should the dollar attempt to take control of the currency pair we should see another attempt to reach is recent lows just below the 1.1050 level and a robust NFP reading could send the euro tumbling lower with the 1.1000 area appearing as the next target in sight.
The cable has corrected higher over the past session and the rate has reached the 1.3000 area after hitting 30-year lows below the 1.2800 level. However, even though the pound managed to bounce higher from these lows the bias remains bearish, an advancing dollar will put the pound under pressure once again and we could see another test of this area soon if the US currency receives the support that we expect.
Focus of the day
The UK Industrial and Manufacturing Production figures will be the first significant report of the day ahead but we don’t expect this release to affect the price action of the pound at all as investors are focused on the broader outlook of the currency and UK’s position in Europe. Later in the day the release of the Initial Jobless Claims report is expected to suggest a bullish NFP reading tomorrow and it might be the catalyst the dollar needs in order to pick up some pace.
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