- Employment report brought hope of recovery from Q1
- Greece feels the pressure – within and from outside
- Look out for retail sales report on Thursday
- CAD seems to be separating from oil
Nothing like a little drama to start the morning. An unnamed French official said that President Obama mentioned that the strong dollar was a problem. Subsequent denials from the White House boosted a recover against the euro and the yen, both of which continued to take gradual gains in the morning session. The dollar has gained 19 percent over the last year, but the voices dictating monetary policy have stated that they do not see this as a long-term issue for the US economy.
Last week’s employment report surprised with a figure well above expectations – 280k versus 225k. This has been largely viewed as an indication that the US is recovering from seasonal weakness in the first quarter. As a strong dollar will likely prevent prices from rising at the Fed’s desired pace, the labor market remains key. This week, keep an eye on US retail sales on Thursday.
The familiar tune of geopolitical risks continue to hum in the background as once again, Greece failed to reach an agreement with its creditors. Instead of negotiating a deal and making their payment last week, the proposal from the EU was rejected and Greece opted to delay payment and bundle it for the end of the month. Domestically, there is a lot of pressure from the Prime Minister Tsipras’ party to hold their ground against the demands of other EU nations. Perhaps this backed his comments that the proposal was “absurd” and “irrational” when Greece has the most to lose in failing to reach an agreement. Spain’s fragmented parliament could also prove tricky to navigate as the 2-party monopoly has been broken.
EURUSD CPI inflation posted its first annual gain in six months, another sign that economic activity in Europe is improving. Overall, the Euro continues to reap the benefits from a weak currency, the impact of the European Central Bank’s easing program, and low energy prices.
GBPUSD Last week the pound returned to pre-election levels. It continues to remain soft ahead of Wednesday where Governor Carney from the Bank of England will make his annual speech. 2014’s speech led to a strong rally for the GBP after rate hikes were mentioned. Any mention of this will put the UK’s monetary policy back in the spotlight, until then the market waits with bated breath.
USDCAD The Canadian dollar is finally breaking its historical tie to oil prices. If this trend continues we will see the CAD following more data-dependent movements. Friday’s employment report showed that Canada added 58.9k jobs, well over the 10k expected. Reaction in USDCAD showed a muted reaction to this news and a bias toward the strong US jobs figures.