According to the minutes of FOMC meeting released yesterday, at the meeting, which was held before the UK referendum, Bank’s executives warned that the exit of the UK from the EU could have significant negative consequences for economic growth in the Eurozone.
Yesterday’s German data on the industrial production for May was also negative (-1.3% against expectations of zero growth), and the US data, showing that the number of jobs in the US private sector (ADP) rose by 172 000 in June, while the number of initial claims for unemployment benefits dropped to 254 000 last week, have triggered the rise in the USD by 40 points.
Today’s data on German foreign trade for May, showed reduction of the trade balance surplus, which was caused by a sharp decrease in exports (-1.8% compared to the growth in the previous month (+0.1% ). European’s largest economy seems to lose momentum in Q2 after a good start at the beginning of the year.
Forthcoming negotiations between the EU and the UK about the exit of Great Britain from the Union, as well as deteriorating prospects for the global and European economies will continue to put pressure on the European stocks and Euro.
Trading activity in the financial markets will decline closer to 14:30 (GMT+2), when the most important US data will become known, which will influence on the entire financial market and determine movement direction in the USD for the next month.
It is expected that the number of new jobs created outside the US agricultural sector (Non-Farm PayRolls) in June will increase by 175.000, while unemployment rate will amount to 4.8% (against 4.7% in May).
If this data proves to be correct or exceeds the forecast, the USD will strengthen in the currency market, because expectations of the market participants of the interest rate hike will increase.
However, some economists believe, that even in case of the positive data, its impact on the USD will be only short-term, as it is unlikely that the US Fed’s attitude to the prospect of the interest rate hike will change, at least until the meeting in November.
Positive data on the US labor market, including hourly wages, can encourage the US Fed to make decision to raise interest rates. This fact will trigger the rise in the USD in the medium-term.