News & Analysis

A raft of central bank decisions were in focus this week, with the RBA, BoE, Riksbank and some LatAm central banks amongst those delivering policy decisions. As we expected, there was a broad hawkish theme to this week’s central bank communications too, with only the BoE delivering a modicum of dovishness. Arguably the most impactful event of the week though, came from the US once again. Whilst not normally a significant market mover, initial jobless claims saw more scrutiny than usual on Thursday following last week’s downside NFP miss. Given this, and despite landing only modestly higher than expected, this was still sufficient to see the broad dollar retrace almost all the week’s gains. Whether or not this dollar weakness is set to become more pervasive is likely to be the main focus for markets next week. In particular, April CPI figures are likely to hold the key to the greenback’s fortunes. Even so, we think it is likely too early to turn bearish on the dollar just yet. Inflation momentum alone suggests that next week’s data is unlikely to soften enough for the Fed to cut earlier than September, which should keep USD bid. Beyond this, a whole raft of Australian data, a UK labour market update and Swedish CPI should also keep traders busy next week. Even so, we doubt that any of the releases are likely to cause significant market ructions, leaving US data as the main event again next week.

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Authors: 

Simon Harvey, Head of FX Analysis

María Marcos, FX Market Analyst

Nick Rees, FX Market Analyst

 

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