Overview
The USD has been firmly in focus this week following the sharp miss in expectations at the Nonfarm Payrolls report last Friday, with focus shifting to this week’s FOMC minutes release. This week Fed speakers had mixed opinions on the significance of the dismal NFP figures, with the more dovish members warning the Fed could be forced to delay rate hikes if markets reacted too aggressively, while others dismissed the data as merely a blip and stated that the US economy remains on a strong growth path that justifies normalizing monetary policy. The FOMC minutes revealed that Fed officials were split on hiking rates next June, however due to the back-dated nature of the release, failed to provide much in terms of direction.
Initial and Continuing Jobless Claims data that showed a slight drop in figures, the USD pulled back from its post NFP lows to post strong gains against major pairs, with the USD-index reaching tantalizingly close to 100. With the FOMC minutes out of the way, next week will see economic reports take back the limelight, with US, UK, Eurozone and Canadian CPI, as well as US Retail Sales all due for release. Furthermore, Wednesday sees the ECB and BoC rate decisions, with some outside bets for the BoC to cut rates.
EUR has also come under considerable pressure as concerns over Greece continued despite the EUR 450mln repayment to the IMF, which saw the ECB lift its ELA for Greek banks and avert a Greek default. As such, EUR/USD briefly broke below the 1.0600 handle to trade at its lowest since March 19, while GBP touched fresh 5-year lows as the looming UK General Election heightened volatility amid the prospect of a hung parliament. Of note, UK party leaders will hold another election debate following last week’s roundup, with participants keeping a closer eye on subsequent polls which have thus far failed to point towards a clear winner.