Currencies began week in calm fashion
EUR/USD traded up to a high of $1.171, while EUR/GBP moved above 74p. Cable (GBP/USD) traded up as high as $1.58. However, as the week progressed some calm returned to markets. This in turn saw the euro give back its gains and the dollar adopt a firmer tone. EUR/USD finished the week around $1.125, while EUR/ GBP traded back down around 73p. Cable (GBP/USD) also fell, trading around $1.54.
Dollar
From a dollar perspective, we get a bundle of US labour market data including nonfarm payrolls. While the data may prove to be less decisive in terms of the Fed’s immediate policy decision, further solid employment figures could still provide some support to the dollar.
This morning the Dollar trades at £0.64891 as of 9:24 GMT+1.
The possibility of interest rate hikes in September has become slightly more likely after Stanley Fischer spoke on Saturday. Fischer outlined that he would like to see further job market gains and be ‘reasonably confident’ that inflation will rise to the targeted 2%.
Fischer also provided insight regarding how the Federal Reserve are considering the information and its future effects. “In making our monetary policy decisions, we are interested more in where the US economy is heading than in knowing whence it came,” Fischer said in his remarks, which were released in Washington. “We need to consider the overall state of the US economy as well as the influence of foreign economies on the US economy.”
Euro
Meanwhile for the euro, no changes to policy are expected at this week’s ECB meeting. However, comments from ECB members last week implied that the recent fall in commodity prices has increased the “downside risk” to the 2% target for inflation.
Therefore, ECB President Draghi will face questions at the post-meeting press conference on the Central Bank’s appetite to do more monetary easing, if necessary. Any dovish signals from Draghi could act as a headwind to the euro.
This morning the Euro trades at £0.72696.
Pound Sterling
There is a quiet schedule in the UK, with the August PMIs the main release. Overall then, sterling may not get much in the way of fresh direction from this week’s UK calendar. All things considered the Pound sterling opens the week at $1.54180.
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