Market Analysis


The impact of an above forecast June Non Farm Payroll number on Friday was eclipsed by a tick higher in the US unemployment rate and a sub-consensus average hourly earnings figure. The net effect was to push EURUSD to around 1.1750 at Friday’s New York close. Notably in proximity to the current 55-day moving average at 1.1775, the EUR retained its gains in today’s Asian session. Nevertheless, given the tightness in short-end US interest rates, and specifically when compared to equivalent euro zone interest rates, traders who are running long of EURUSD over a period of days do have to pay away points for doing so. At the same time there are two event risks for EURUSD that might lead some euro bulls to wonder whether lightening (although not necessarily eliminating) their exposure might be worth considering. First off on Tuesday there is the German July ZEW investor confidence survey. As the data would have been collected in advance of release, during a period where European Union/United States trade relations were getting tenser, traders might wonder if the risk surrounding the ZEW survey is for a weak reading. Looking beyond that is Thursday’s US Consumer Price Index data where some analysts are already predicting a year-on-year print of 2.9 per cent. Such an outcome would likely only reinforce the narrative of another two Federal Rate hikes this year.

Written by Neal Kimberley, External Currency Analyst.