The most important events this week that could weigh on the movements of major currencies will be US non-farm payrolls, as well as Purchasing Managers’ Index reports from a number of major economies.
The U.S. dollar managed to rise strongly last week to the highest level in nearly three months on signs of easing geopolitical and trade tensions.
This week, eyes will focus on the U.S. non-farm payrolls that will give an update about the health of the labor market in the first month of the second quarter.
American employers have probably created 195,000 jobs in April and unemployment rate have lingered at 4.1 percent, the NFP report may show.
The famous jobs report along with inflation data are likely to shape the future of rate hikes by the Federal Reserve, and therefore it could affect the movements of the dollar by the end of last week.
While the Fed is highly anticipated to hold the interest rate at 1.75 percent this week, the FOMC statement could include some important updates about the economy.
Core PCE price index, the Fed’s favorite measure of inflation, could show acceleration in the year ended March to 1.8 percent from 1.6 percent. That would be a step forward towards the 2 percent goal.
Market participants will also continue to watch treasury yield after the ease of the U.S. 10-year treasury return from the highest level since January 2014 at the end of last week.
Last week, the euro was hit by dovish remarks from European central Bank President Mario Draghi and weak growth data from France.
The most important data this week will be the flash euro area first-quarter GDP and the flash consumer price index for April.
The 19-nation economy probably eased expansion to 0.4 percent in the first three months of 2018 from 0.6 percent growth three months earlier.
Euro area CPI for the year ended April may signal an acceleration to 1.4 percent from a previous of 1.3 percent.
A better than forecast GDP and CPI data could help the euro to rebound, while downbeat data may push it down further.
After the release of dismal U.K. first-quarter GDP, showing an ease in expansion to a five-year low, investors will carefully watch the Purchasing Managers’ index reports for April due this week.
While the services sector is the predominant in the U.K., the construction PMI could get more attention as it was the key reason behind the ease in first-quarter growth after it contracted 3.3 percent.
Construction PMI may come back to expansion by recording 51.9 in April from 47.0 in March, according to analysts’ expectations.
Services growth may have widened to 54.1 in April from 51.7 in March, while manufacturing may see a rise to 51.9 from 55.1.
An improvement in U.K. PMI data would raise expectations of an interest rate hike in May, which could give an upside push to the pound that fell versus the dollar last week near an eight-month low.
Gold slumped for a second straight week last week, as the strength of the dollar lowered the appeal of the precious metal as an alternative investment.
Gold has continued to face some downside pressure after hitting a top of $1355.70 an ounce on April 18.
Any attempts from the dollar to resume its rally could trigger more selling in the yellow metal, yet it could rise slightly after finding support near $1307.
Regarding oil, it faced some pressure by the end of last week due to the dollar’s strength, but continued to trade near the highest level since December 2014.
Oil prices benefited from expectations that the U.S. would reimpose sanctions on Iran on May 10, but some the gains were also capped by the rise in U.S. shale production.
U.S. crude inventories may have risen by 0.13 million barrel in the week
ended April 27 after a crude build of 2.17 million barrel a week before,
according to the U.S. government EIA report forecasts.