The NFP data dominated last week and this week it’s the US CPI and ECB that are conspiring to pressure the USD, all ahead of the key G7 meeting of world leaders this weekend.
The Dollar rally ahead of the disappointing NFP data last week was short lived. Yields dominate this week ahead of the key US CPI data and the ECB Interest Rate Announcement. The G7 Meeting also holds sway this weekend. Economic data remains positive, with Services PMIs and the JOLTS report both strong.
Jobs, Earnings and Unemployment remain very much in focus. The weekly US unemployment claims continue to trend lower; last week’s 385,000 was another new pandemic era low, with 370,000 expected this week. The ADP data was a big beat at 978,00, but NFP disappointed at 559,000, although the unemployment rate dipped to 5.8% and Earnings spiked to 2.0%, suggesting hotspots in some parts of the jobs market but weakness elsewhere.
The vaccine rollouts continue to drive sentiment, but the virus variants remain a significant concern. The US and UK continue to lead the vaccine rollouts, and Europe is also now moving forward too. However, the situation in India remains significant and lockdowns remain in place in countries from Malaysia to Australia.
This week FX volatility continued as the USD held above late May 2021 lows. The USDIndex spiked to 90.60 ahead of Jobs Day last week, only to slip back to around 90.00, ahead of CPI & the ECB. EURUSD dipped to test 1.2100 from over 1.2200 and holds over 1.2150. USDJPY spiked to 110.20 in the dollar bid but soon recoiled back to 109.50, where it holds, while Cable could not hold over 1.4200 this week, but similarly did not want to close under 1.4100, biased higher as the USD weakened.
Global stock markets pushed higher and consolidated. The tech stocks recovered some of their losses from May as yields cooled and the “Meme” stocks took centre stage. Last week AMC, this week Clover Health appears to be in focus. The USA500 holds over 4,200 and has tested new all-time highs over 4,230.
The Gold price collapsed earlier in the week after a 4-day break of the $1900-05 resistance zone. Prices fell to test the 20-day moving average and trade as low at $1855 before recovering to $1890. The technical $1875 is key support and $1925 the key resistance area. Psychologically, $1900 is key.
USOil prices continued to rally this week and broke the key $70.00 level as inventories continue to be drawn down, with improving global demand projections and the worry over possible new Iranian oil supplies diminishing.
The yield on the US 10-Year Treasury Note, very much in focus again ahead of US CPI data, still holds above the psychological 1.50% level but dipped to near one-month lows at 1.508% and remains anchored under the key support level at 1.60%.
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Stuart Cowell
Head Market Analyst
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