Data from the US labor market helped the US dollar due to higher employment growth than market expectations. Popular NFP increased by 224,000 in June against a consensus of 160,000. Meanwhile, the unemployment rate rose from 3.6 to 3.7 percent.
Better US data also translated into other markets, including the interest rate market. After the report, the odds of cutting interest rates by 50 basis points at the July meeting of the Federal Reserve of the United States fell from 26 percent to 15 percent. The US stock indices and bonds has fallen. All because of the smaller odds of providing cheaper money by the FED. This in turn may be a beneficial factor for the dollar.
One of the key events of the week, due to market expectations regarding the Federal Reserve's further policy, will be the appearance of Jerome Powell. The President of the FED will present a semi-annual report on monetary policy to the committees of the House of Representatives and the Senate. The speeches will take place on Wednesday at 4:00 PM and Thursday at 4:30 PM, however the content of the report should appear earlier. In the report and speeches, investors will look for tips on how the FED can proceed, and Jerome Powell can signal a cut of 25 basis points.
In the week it will also be worth paying attention to the decision of the Bank of Canada on interest rates, because recently the Canadian dollar has definitely strengthened against the US dollar. Nevertheless, it seems that the Bank of Canada may keep the monetary policy unchanged, taking into account the recent improvements in sentiment and activity data and a surprising increase in inflation.
We should also remember the monthly GDP figures from the UK, which may affect the British pound. The publication will take place on Wednesday at 10:30, and the market consensus assumes a 0.3 percent rebound in May in monthly terms after April's GDP decline by -0.4 percent.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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