This week saw a strong start to the week for the USD with hawkish rhetoric from the Fed after a slew of Fed speakers insisted that the central bank are still on track to hike rates in 2015, a view which was also shared by Chair Yellen on Thursday. EUR gained some ground against the greenback in the wake of ECB President Draghi’s quarterly hearing with the central banker refusing to give any clues on whether or when there could be further easing by the ECB. However, EUR was unable to out-muscle the USD as the prospect of 2015 Fed lift-off dominated price action in the latter stages of the week. Of note, markets are now pricing in a 47% chance of a Fed hike this year compared to the 41% heading into Yellen’s speech.
This week also saw further easing from various central banks with both Norway and Taiwan coming to market with rate cuts as ongoing global concerns continue to remain at the forefront of monetary policy across the world. Furthermore from a central bank perspective, analyst expectations are beginning to mount for the BoJ to add to their QQE programme as subdued inflation levels continue to pose a threat to the Japanese economy.
Looking ahead to next week, the main event on the calendar will be that of the latest monthly US jobs report. Consensus is currently for a reading of 200k which would be in line with the Fed’s desired threshold and thus signal continuing improvements in the US labour market. Focus will also be on the earnings components of the release given the strong pick-up seen in last month’s report with participants looking for further confirmation that the Fed will hike rates this year.
Other notable events include, the latest set of Eurozone and German inflation data, UK GDP, results of the Catalan election, Japanese industrial production & retail sales and Chinese manufacturing PMI.