Last week was once again filled with an excess of dollar strength, as the USD index reached the 100 mark for the first time since pre-recession in 2003. With there being a QE programme in Europe, described as ‘too successful’ by many analysts and a continued risk associated with Greece and its creditors, EUR/USD fell to lows of 1.046 last week. Many traders are expecting a more hawkish outlook on the monetary policy statement this week from the U.S, as many predict the removal of the phrase ‘patient’ from the statement post-NFP. A rate hike is now expected in the summer, with many predicting a rate hike in June. The USD was able to therefore make a surge, as GBP/USD also broke below the 1.49 mark, reaching lows of just below the 1.47 mark. The USD index has struggled to make a definitive break of the 100 mark as it stalled towards the end of the week, after the release of another disappointing retail sales figure. With recent months showing a fall in retail sales, there is still deflationary risk for the U.S and puts risks on a rate hike.
Today is fairly quiet in terms of news announcements, as the euro makes a slight retrace on its losses over last week, however there is still downside risk with problems in Greece unresolved. The USD index surge has caused a fall among major commodities including Gold. As oil is seeing a move towards its lows, WTI is approaching its lows below the 44 mark, previously described as a price floor. If the price floor is breached there is likely to be continued deflationary risk among major economies, when many predicted the worst to be over.
This week will see mass volatility with many important announcements due, as Wednesday will become the main focus; with the ECB meeting on Wednesday likely to bring an update on the Greek situation with creditors and later in the morning will see the BOE minutes likely to elaborate views on inflation reaching 0% in coming months. The most important though will be the Fed’s monetary policy statement as the ‘patient’ phrase is likely to be removed, with USD/JPY being the focus for trading with many expecting a surge of USD/JPY to reach just below the 125 mark, as recent euro risk has disallowed the pair to make a climb as of yet and a rate hike expectation in June is likely to see the pair finally surge.
That’s the wrap for today, Good Luck with your trading endeavours.