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Weekly FX Outlook: Central Banks In Focus

Published 04/01/2016, 10:42 AM
Updated 07/09/2023, 06:31 AM
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Friday’s session revolved around the much awaited US payrolls release, after Fed Chair Yellen’s speech in NY Tuesday revealed a less hawkish mood at the Fed, questioning the market’s belief in 2 hikes in the Fed funds rate this year. Healthy ADP numbers midweek could not be counted upon for a similar result today, but at 215k, we exceeded expectations, but more importantly continued the steady series of jobs gains seen in recent months. Later in the day, US ISM manufacturing and Michigan sentiment also beat forecasts, adding to the strong USD gains seen in the wake of nonfarm payrolls.

GBP and CAD led the way ahead of the data releases, with cable topping out at 1.4370 or so, to eventually record a 2 cent loss on the day. From the mid 1.2800s seen earlier in the week, USD/CAD has rallied 3 cents in the meantime, but looks a little tired at the highs. Oil prices have been on the wane to push the CAD lower again, despite strong Canadian growth stats released only yesterday.

EUR/USD was intent on testing 1.1500, led by EUR/GBP buying which managed to trip .8000, but both retreated later in the day, with the spot rate topping out at 1.1437 for now. EUR/GBP resistance in the .8030-65 zone will be a tough ask in the GBP rate, but Brexit fears leave this area vulnerable.

AUD and NZD both came off their better levels seen, but were very much in the background given larger moves elsewhere. JPY also slipped into the background, seeing tight ranges in comparison.

Plenty of central bank focus next week, with FOMC minutes and the ECB account of note, ahead of the RBA meeting on Tuesday – FX levels will no doubt be mentioned. Significant data releases include UK services PMI and German industrial production.

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