Regarding the Euro it looks like Draghi will have to ease again to stem euro strength. He has clearly stated several times of late that he doesn’t want the euro above $1.38 and especially not $1.39. If last week’s price action is anything to go by however, it looks like that is exactly where it’s heading. The market may push the European Central Bank into a corner that they simply cannot get out of without more aggressive tactics. So even though the statement today has failed to have the desired effect, the higher the Euro goes, the more interesting the currency will get for future trades down the line.
The major news out last week came on Friday 6th June (after this report has been written), NFP figures from the US. What was very interesting from the last NFP in May was that the headline figure came out positive (288k actual over 218k expected and 203k previous) but any dollar strength was heavily muted. Why was this? Well the market was in fact looking more closely at the secondary data, to get a feel for the quality of it. The ‘average hourly earnings’ figure came in at 0.0% highlighting the fact that even though more jobs had been created they were poorly paid, seasonal, temporary jobs. And this is why the dollar failed to strengthen significantly off the back of the news. So pay close attention to both the headline figure, the unemployment rate and the average earnings. If all are positive this is great for the dollar however if they conflict then the market could again be concerned about the quality of the data and the USD may suffer.