The euro traded in a range of 1.1180-1.1240 during today’s Asian session, following a roller-coaster ride the previous day that saw it climb to 1.1379 from around 1.1229. 10-year bund yields climbed to nearly 1%, then back down to 0.82% subsequently. The volatile movements of long-term interest rates had a profound effect on the euro.
Trading in the US dollar was basically subdued ahead of the announcement of the all-important May employment numbers. The debate on when the Fed should raise interest rates was ongoing, with the International Monetary Fund weighing in by urging the Federal Reserve to refrain from raising rates until the first half of 2016. An article in Reuters also pointed out that more Fed Governors are leaning towards postponing the first interest rate increase.
Today’s nonfarm payrolls report should help determine whether the US economy is on course, which should boost the chances of a rate hike in September. Any significant disappointment will make a delay more likely, which in turn would hit the dollar. The consensus expectation is for 225,000 jobs to have been created, which is very close to the previous month’s 223,000 number. Unemployment should remain constant at 5.4%, according to economists.
US data yesterday showed a downtick in weekly jobless claims, while unit labor costs climbed more than expected during the first quarter, sparking some concerns that wage inflation could be a factor to watch in coming months.
In a story that is closely followed by the market, Greece asked the IMF to bundle together all its June debt repayments to the end of the month. Greece’s failure to make today’s 300 million euros payment to the IMF rattled optimism that a deal was close. German Chancellor Angela Merkel also said that the two parties were far from an agreement, while a scheduled meeting later today between the Greek Prime Minister and the Head of the European Commission was scrapped. The Greek government would present the state of the negotiations to the country’s parliament, as many parliamentarians of the ruling party were reportedly outraged by the creditors’ latest proposals.
Monday could see a fresh meeting between the heads of the ECB, IMF, the Commission and Germany and France to decide the next steps regarding the Greek debt negotiations.