Talking Points:
- US Dollar to Resume Pullback Unless Jobs Report Markedly Tops Forecasts
- Pound Soars as Early UK Election Results See PM Cameron Holding Power
- See Economic Releases Directly on Your Charts with the DailyFX News App
Currency markets are likely to look beyond a string of second-tier European economic releases as all eyes turn to April’s US Employmentreport. Expectations point to a 228,000 increase in nonfarm payrolls, marking a rebound following last month’s disappointing 126,000 result (the lowest since December 2013).
On balance, only an outcome substantially above the 12-month trend average of 260,000 seems likely to meaningfully shift up Fed interest rate hike expectations. Absent such a result, the US Dollar may resume the downward correction in play since mid-April after investors put event risk behind them.
The British Pound outperformed in overnight trade, rising by as much as 2.1 percent on average against its leading counterparts. The move was set off after a exit polls following the UK general election showed Prime Minister David Cameron’s Conservative party in the lead and poised to remain in power.
The currency’s response likely reflects the withdrawal of uncertainty risk associated with the election. A Tory-dominated coalition government led Mr. Cameron represents the status quo, allowing investors to re-focus on monetary policy and other core macro considerations without worrying about what a potential about-face on the fiscal side might have meant.
