By Dhilshan Sandanarajah
Last week had an abundance of news sentiments as markets became extremely volatile, with sentiment mainly focused around the U.S and Eurozone. Towards the beginning of the week it became clear that European creditors would give Greece a four month extension to their bailout programme, which settled some nerves as the current programme expiry neared. EUR/USD lifted to weekly highs of just below the 1.14 mark as this was pared with less hawkish remarks than expected from Yellen’s testimony, which gave less idea of rate lift off timing than traders had expected. The USD weakened against many pairs, with USD/JPY reaching lows of 118.6 after it had made large gains in expectation of a more hawkish Yellen testimony. GBP/USD made some large gains mid –week as it reached monthly highs of 1.555, amid a hawkish inflation hearing and positive expectation surrounding GDP figures from the UK. As the week ended though, the USD was able to pare back gains as direction became clearer. As though Yellen’s speech was not as hawkish as expected, it is still in line with a rate lift off in June. EUR/USD made the biggest fall to lows of 1.118 as though the extension of the bailout programme has settled some nerves, it is becoming clear that this is a ‘quick fix’ and uncertainty still follows as meetings with European creditors showed little room for negotiation, so Greece may not be out of the woods yet.
This morning began with fairly weak manufacturing PMI as the Euro area figure remains at 51, EUR/USD plunged to lows of just below the 1.116 mark. However later in the morning took a more hawkish outlook for the Euro as annual CPI rises to negative 0.3% and Unemployment falls to 11.2%. EUR/USD made a bounce to the upside and currently trades around 1.123, with EUR/JPY breaking above the 134 mark.
Later in the day we can expect markets to centre around U.S news sentiment of ISM manufacturing PMI. Other than that a fairly scarce U.S session, with news sentiments being focused more around the European session. As the U.S session nears open it is important to note that the energy sector is underperforming after Saudi Arabia increases its output 130,000 bpd, this is likely to have a knock on effect on U.S equities with stocks likely to open lower.
This week’s focus will be on the ECB monetary policy statement mid-week which is likely to go in to the technicalities of the QE program due to start soon. The end of the week will see U.S non-farm payrolls which are expected at 240,000.
That’s the wrap for today, Good Luck with your trading endeavours.