The beginning of this week had the feeling that summer trading was about to begin, where liquidity is thinner and market volatility begins to plateau. However, any signs of fatigue in market pricing were soon reversed on Thursday when US data kicked the US dollar back into life and the DXY index climbed back above the 90.00 handle. SEK, AUD and NZD all fell over a percentage point against the greenback that day, while EM currencies also felt the pain of rising US yields. Thursday’s trading session set the scene for Friday’s release of May’s Nonfarm Payrolls data, which showed the US labour market under-deliver on expectations.
Looking ahead, central banks will come back to the fore next week with the European Central Bank, the Bank of Canada, and the Bank of Russia releasing their latest policy decisions. The ECB is likely to steal the show as speculation over the next PEPP decision rises, while the Bank of Canada is unlikely to deviate from the last meeting’s tone after they decided to taper the pace of QE. The Bank of Canada decision comes shortly after Q1 growth data undershot expectations.
Read our latest Week Ahead in full here:
Simon Harvey, Senior FX Market Analyst
Olivia Alvarez, FX Market Analyst
Ima Sammani, FX Market Analyst