Data Watch: ECB and Non-Farm Payrolls this week
29/06/08 20:24
We had a series of dollar negative events last week
on which the dollar suffered. Firstly, the highly
anticipated FOMC statement showed lack of urgency in
a rate hike from Fed, contrary to what Bernanke led
markets to believe some weeks earlier. Markets pared
bets on near term hikes with odds of an Aug, as
implied by interest rate futures, down from 40% to
25%.
Odds of an Sept hike was also down to just slightly above 50% and the case looks shaky if upcoming economic data doesn't show sign of stabilization in the economy. In my opinion, NO hikes this year under the current scenario, although that could chanage. The FED used verbal intervention to toy with mass psychology of the market and the market has now figured this out and is repricing the USD accordingly.Secondly, oil price surged to another record high close to $143 a barrel. The surge in oil price then triggered sharp sell off in the equity markets and is considered inflationary thus impacting the USD.
Meanwhile, even though the Japanese yen did close lower against Euro and made a record low of 169.46 on Thursday, Friday's reversal is treated as a warning that more strength in the Japanese could be seen due to risk aversion permeating from news on speculation that Citigroup will disclose further writedowns. And if Citigroup has been hiding something, so are the others, which means the move to risk aversion could trigger a new trend against JPY pairs into JPY strength.
Looking ahead, a couple of important events will are scheduled this week, including the highly anticipated ECB rate decision and NFP, ISMs from US.