Forex Major Currencies Outlook (June 5, 2014)

Data from the US economy was mostly stronger than expected, with the ISM non-manufacturing PMI climbing from 55.2 to 56.3. Revised non-farm productivity and unit labor costs also showed better than expected results. However, the ADP non-farm employment change missed expectations, leading some to expect a weak NFP reading for Friday. For today, only the initial jobless claims report is due and it might show a higher figure of 309K versus the previous 300K.

EUR

The euro sank again in recent trading when traders started pricing in expectations of further easing from the ECB in today’s interest rate decision. Euro zone data was mostly in line with expectations, with only the Spanish services PMI printing weaker than expected results. For today, German factory orders are also up for release and it might show a 1.3% rebound. However, this could be overshadowed by the ECB event during which Draghi might announce negative deposit rates or further LTRO.

GBP

The pound struggled to hold steady in recent trading when services PMI came in better than expected at 58.6 versus the estimated 58.3 reading. However, this is a small decline compared to the previous 58.7 figure. For today, the BOE interest rate decision might spark a lot of volatility for pound pairs, although Carney and his men are likely to keep monetary policy unchanged for the time being.

CHF

The franc bounced back and forth in recent trading, as the lack of top-tier data from Switzerland kept the currency in range. There are still no reports due from Switzerland today but bear in mind that the franc tends to react the same way as the euro when there are top-tier events in the euro zone. With that, the ECB rate statement might also lead to franc weakness if the central bank decides to ease.

JPY

The yen put up a good fight to its major forex counterparts, despite the lack of data from Japan yesterday. There are no major reports lined up from the country today, which suggests that yen pairs might be sensitive to risk sentiment and country-specific events.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar edged higher in recent trading when the GDP release showed a stronger than expected 1.1% growth versus the estimated 0.9% uptick. The New Zealand dollar also recovered off its recent lows but maintained its downtrend. As for the Canadian dollar, it lost ground on the heels of a dovish BOC statement, as Governor Carney spoke of weak inflationary pressures. Australian trade balance and Ivey PMI are the main event risks for the Aussie and Loonie today.

By Kate Curtis from Trader's Way