- The US dollar lost ground overnight with the dollar index falling, extending the post FOMC sell-off. US weekly jobless claims came in lower than estimated and remain at the low levels witness in the last few months. Wage pressures remain a concern to the FOMC and to the outlook for the US economy and unit labor costs surprisingly rose 4.7% q/q in the first three months of the year against expectations of 4.0%. Ongoing concerns over intervention by Japanese authorities to support the flagging yen are adding further pressure and uncertainty to currency markets.
- EURUSD remains rangebound after this week’s CPI and GDP data with the pair hovering above 1.07 support. According to Chief Economist Philip Lane, the ECB is taking a meeting-by-meeting approach for its next steps on monetary policy. In a speech yesterday he said, “we are not pre-committing to a particular rate path,” saying that “a data-dependent and meeting-by-meeting approach is the best way to ensure that the calibration of monetary policy incorporates the multiple dimensions” of current uncertainty. A June 6th rate cut seems highly likely, but the path beyond that initial cut remains unclear, with some suggesting back-to-back cuts whilst others remain cautious over hasty moves.
- This afternoon the attention shifts to the US as we eagerly await the release of the April Non-farm Payroll report. The pace of hiring remains consistent however signs of a cooling labor market remain, with markets expecting a softer print of 250k today – down from last month’s 303k.
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