Last week ended with the US GDP (Gross Domestic Product) being released on Friday and market participants were surprised to see only a modest 1.2% increase when compared with 2.6% expected. Needless to say the US dollar tanked on the news, even though details were not that bad, with consumption on the rise despite the worse than expected headline.
EURUSD stretched higher as a consequence, followed by AUDUSD and other USD related pairs, with no pullback until Friday’s closing. However, not all of the moves were sustainable, as the AUDUSD for example, completely erased the move as today RBA (Reserve Bank of Australia) cut the interest rate to a historic low of 1.5%.
The initial reaction was the right one, retracing all the GDP advance the pair made, but it proved to be only a fake reaction as buyers stepped in taking AUDUSD back towards 0.76. So much with currencies depreciating on central banks rate cuts!
The event of the week will come next Friday as the NFP (Non-Farm Payrolls) is going to be released in the United States. After GDP disappointing, everyone is looking for NFP to do the same, but I would advise for a cautious approach to the release.
Things are looking quite good on the other side of the ocean from an economic point of view and with new house sales at almost record pace I wouldn’t be surprised to see the strong employment trend to continue. ADP (private payrolls) will offer us a glimpse into what the actual NFP number may be, and one thing is for sure: volatility will be on the rise.
A September rate hike is in cards at least judging by the fact that Fed’s George dissented last time. If NFP is proving to be stronger than expected, market participants will start positioning for the September meeting so there’s a fairly strong chance to see the US dollar travelling at the end of the week.
Summer trading environment and conditions are still present and it seems that market is dependent on this economic releases as it is the only time in the trading day that prices are moving. Long consolidations are still present and we have to adapt until September comes.