General market theme
On Friday investors’ attention was focused on the release of the Non-Farm Payroll report and we had highlighted the importance of this event in our previous report as it would set the tone for dollar’s price action. The US currency has been enjoying a recent surge in demand as traders were hoping for a positive reading however the figures that were released definitely disappointed them.
The miss in the number of jobs added in the US economy sent the dollar moderately lower in light of the stronger wage growth recorded in the past month but certainly took any chance of a rate hike next off the table. However the uptick in the earnings component leaves a small window open from more dollar strength this week as investors are hoping it might translate into a stronger Retail Sales printing.
Price action highlights
The euro ticked higher on the back of the NFP report and reached the 1.1475 level but as we mentioned above the rally was pretty small considering the miss in the labor market report and this morning the single currency is trading below pre-NFP levels. The week ahead has a number of events that could drive the Euro either way and investors’ hopes for a stronger Retail Sales reading from the US might allow the dollar to remain afloat against the euro and send the currency even lower if the EU-related reports miss their marks.
The cable had an even smaller reaction to the miss in the NFP report and even though it briefly edged above its recent highs around the 1.4520 level it retreated lower during the rest of the day. This morning the UK currency is trading just shy of the 1.4400 support and further bearish UK reports might send the currency lower especially ahead of the Brexit referendum that is still undecided and continues to pose a risk for the pound. A further correction would send the cable towards the 1.4300 support area but more dollar strength is needed to support such a move.
Focus of the day
Today the calendar is empty of any important reports or events and price action will take its cue from last week’s events. It is clear that investors were positioned for a weaker NFP reading hence the moderate reaction after the miss so we might see a repositioning this week ahead of the Retail Sales report from the US but today the price action is expected to be relatively light.
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