Forex Major Currencies Outlook (June 6, 2014)

Perhaps the dollar was acting merely as a counter currency in the latest trading sessions, as traders awaited the release of the NFP report today. Weaker gains in hiring are expected, as the economy probably added 214K jobs in May. The jobless rate is expected to tick higher from 6.3% to 6.4%, but this might mostly be a result of an improvement in the participation rate. Weak surface data could undermine dollar strength in the short-term but could eventually lead to a steady rise if the underlying data shows green shoots.

EUR

The euro had a very volatile trading day as it sold off initially on the ECB announcement of a rate cut, negative deposit rates, and new LTRO. Draghi even mentioned that the central bank is ready to ease further and that they are not done with stimulating the economy. Later on though, profit-taking ensued and pushed the euro back to its levels prior to the ECB statement or higher. Traders could be pricing in improvements in future euro zone data but it is likely that the longer-term downtrend on the euro might resume sooner or later.

GBP

The pound made a quick bounce in recent trading as European traders probably moved their money from the euro to the pound. There were no monetary policy changes announced during the BOE rate decision, as Carney mentioned that the UK economy is moving closer to the point where interest rates could be increased. UK consumer inflation expectations and trade balance are up for release today and upbeat figures could renew pound strength.

CHF

The franc also had a volatile trading day similar to the euro, as traders recalled that the SNB might also take action if the ECB announces easing measures. Recall that the SNB wants to defend its EUR/CHF floor and the ECB’s decision to implement further easing might force the SNB’s hand. Data on Swiss foreign currency reserves and CPI are due today.

JPY

The yen gained ground to most of its counterparts in recent trading, except for the euro which had a rocky trading day. There have been no major reports released from Japan recently and none are lined up for today, which suggests that yen movement was mostly a result of changes in market sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls had a bit of recovery going in recent trading, as AUD/USD and NZD/USD put an end to their recent selloff. The Loonie was weaker on the day as the BOC recently emphasized their economic concerns then the Ivey PMI confirmed the ongoing weakness in the economy. The figure fell to the contractionary zone, suggesting that further signs of a slowdown in Canada might be seen. Jobs data is due today and a rebound of 24.5K is expected.

By Kate Curtis from Trader's Way