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This week is going to be a long way for the ECB meeting on Thursday and then US labour market data on Friday.   If anything, the risk with the ECB is that the market is disappointed by what is eventually delivered.   We wrote more in detail regarding the outlook for the euro after the ECB – “The ECB won’t weaken the euro”.  Essentially, even in combination, the measures likely to be announced are unlikely to significantly weaken the euro, once the initial short-term reaction has worked its way through. The ECB is likely to enact its version of quantitative easing very late in the day compared to other central banks and its form will be limited in comparison, without the strong capital market reaction that was seen in other countries where central banks were able to more actively buy securities in the open market.

Overnight, we’ve see the dollar strengthen against the Aussie, with some euro selling vs. the dollar also being noted at the start of the European session.   For the Aussie, data overnight showed house prices falling nearly 2%, with building approvals for April also on the weak side, seeing a 5.6% decline. The Aussie was back below the 0.9250 level as a result, a level which has proven a key area of resistance on the upside, and a close below would set the Aussie for a more bearish outlook on the charts for the week ahead. As for today, final manufacturing PMI data for the Eurozone is seen, together data for the UK at 08:30 GMT.   US ISM manufacturing data will be seen later today at 14:00 GMT.   The dollar managed a positive month last month, but has not seen two consecutive gains (on the dollar index) since February and March last year so dollar bulls will once again be hoping for the start of the much awaited bull trend.

Further reading:

Forex Crunch Key Metrics May 2014

Will Draghi make good on policy easing promise (threat)?