The ECB did not weaken the euro. The market is waiting for NFP

07.06.2019 09:29|Daniel Kostecki

One of the two undoubtedly key events of this week is behind us. It was a decision and press conference of the European Central Bank. Today, at 14:30 we will be waiting for data from the US labor market, including popular NFP (non-farm payrolls).

According to market expectations, the European Central Bank left interest rates unchanged. The reference rate is still 0.00 percent and the deposit rate minus 0.40 percent. However, in the statement the ECB shifted expectations over the next rate increase from the end of 2019 to mid-2020 or later. "The Governing Council is now expecting the ECB's key interest rates to remain at its current level until at least the first half of 2020" says the statement.

Nevertheless, despite the retraction of interest rate increases, the euro has strengthened, and this seems to be a reaction to the optimism of macroeconomic projections. The market, receiving a series of not the best data from the European economy, and also looking at falling inflation expectations, most likely expected a downgrade of forecasts. Meanwhile, the ECB seems more optimistic. The GDP growth forecast for 2019 was revised upwards from 1.1%. up to 1.2 percent. The inflation forecast was also raised from 1.2 to 1.3 percent. in 2019.

The EUR/USD for the second time defended the area of 1.1300, trying once again to break the trend line from the September 2018 high. It is also worth paying attention to what is happening on the FX options market. The turnover on options for the euro was higher yesterday due to investors' expectations towards weaker dollar before today's data from the US labor market – according to data from Bloomberg.

After the weak reading of ADP this week, the attention is focused on NFP, where the market will look for confirmation that the actual increase in employment in the United States was so low. This, in turn, may help determine if the Fed will cut rates in the coming months. That is why today's publication at 14:30 is so important. Market consensus is 185,000, and in addition to NFP, the US unemployment rate or average hourly earnings will also be published.


Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

See also:

6 Jun 2019 13:15

The European Central Bank may be under pressure

6 Jun 2019 9:10

The sell-off on the oil market deepened

5 Jun 2019 15:41

Dollar extend loss after weak ADP

5 Jun 2019 13:09

Gold hits 4-month high

5 Jun 2019 11:07

The World Bank has lowered forecasts for global economic growth

4 Jun 2019 17:37

USD after Powell’s speach

Start chat