Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Euro hit after EU elections
The euro was sharply lower on Monday as markets reacted to the strong showing of far-right parties and the snap national election called by French president Emmanuel Macron.
The EUR/USD fell 0.3% as it hit one-month lows while EUR/GBP lost 0.4% and hit 22-month lows.
In APAC, the AUD/EUR jumped 0.8% as it neared five-month highs. The EUR/SGD fell 0.3%.
In other markets, the US dollar gave back some of Friday’s post-job gains as markets looked ahead to Thursday morning’s critical Federal Reserve meeting.
The AUD/USD gained 0.4% while NZD/USD climbed 0.3%.
The USD/CNH and USD/SGD saw small gains.
USD strength endures
Looking more closely at the US dollar, stronger after Friday’s higher than expected jobs report at 272k new jobs (well above the 180k forecast), we anticipate that in May, the NFIB small business optimism index decreased somewhat. It is likely that the net percentage of enterprises expecting an improvement in the economy stayed negative.
Respondent comments in the May ISM services indicate that business confidence is expected to be negatively impacted by uncertainty over the timing of rate reduction.
The USD might remain supported in the medium term due to its high returns, growth cushion, and other factors.
UK jobs data due
Tonight’s UK jobs report is likely to be an important data point, but there doesn’t seem to be much chance of the Bank of England lowering interest rates next week given the robust pay increase in the survey from last month and the high level of services inflation.
Financial markets see a less-than 10% chance of a BoE rate cut next week (source: Refinitiv).
The monthly increase rate of regular pay in the private sector is likely to be the most significant piece of information from this report.
The first quarter of 2024 had monthly growth rates of 0.0%, 0.9%, and 0.6% m-om, for an average annualized rate of 5.8% during the quarter—the highest since the 3m to July of the previous year.
The GBP/USD has recently turned lower near the year’s highs at 1.28/2900 and this could drive some short-term weakness.
Euro weaker across markets
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 10 – 15 June
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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