Week In FX Europe – After NFP, ECB, Russia and the Dollar In Focus

Friday’s NFP surprise (+288k and +6.3% UE) has managed to temporarily nick the EUR bull, but not enough to break the pair from the broad range (€1.3775-1.3880). Geopolitical concerns aside, next week’s rate decision at the ECB (May 8th) are now in focus. Market consensus expects Euro monetary policy to remain steady as recovery unfolds.

Earlier this morning the final manufacturing PMI reading for the region came in at 54.1, slightly down from the flash reading of 54.2 and better than the 53.7 seen in March. Collectively the PMI’s carry a mixed message for Draghi and company. Activity continues to pick up, showing expansion outside Germany, with France, Italy and Spain seeing their final print above 50 (expansion territory). A concern to many was the fact that manufactures cut their prices for a second consecutive month – a worrying development for Draghi and company. The issue for the ECB is not a slow Euro recovery, but the persistence of “low” inflation that despite this months bounce (below expectations and above the March print – 0.7%) remains a priority issue for Euro policy makers.

Because of benign Euro inflation situation the market has only attached a small probability to the ECB actually doing anything to monetary policy next week – the fixed income traders are more confident in pricing in an easing move in June instead. A rate cut or negative deposit rates are something that the market expects then with QE on the cards for later in the year.

Obviously, any additional monetary easing by a G7 central bank will create market volatility – creating risks and opportunities for investors. Until then, the forex market is beholding to the varying trading ranges intermittingly been broken by geopolitical issues. After Friday’s NFP headline the dollar found only brief favor with investors – both US treasury yields and the dollar fell on news reports that Russia has called for an emergency meeting of the UN security council.


* AUD Reserve Bank of Australia Rate Decision
* JPY Bank of Japan meeting minutes
* AUD Employment Change
* GBP Bank of England Rate Decision
* EUR ECB Marginal Lending Facility
* EUR European Central Bank Rate Decision
* AUD RBA Statement on Monetary Policy
* CAD Unemployment Rate

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell