US Dollar rose against the majority of its counterparts on a day with little US related economic data, while Euro fell after the ECB announced its monetary policy decision and made some comments on the inflation and the QE program.
Australian Dollar
Trade Balance for Australia and the month of April was reported positive at 555 million Australian Dollars, but it narrowed significantly as the forecast was much higher at 2000 million Australian Dollars and previous reading was 3107 million Australian Dollars. This surplus is positive for the Australian Dollar, showing more exports than exports and a demand for the currency, but the very large shrinkage of the surplus is something to watch closely in the following months. AUS/USD rose from 0.7523 to 0.7553.
Euro
The ECB left its key interest rate unchanged to 0.00% as expected, but there were comments which downgraded inflation forecasts for the next three years. In 2017 inflation was forecasted down from 1.7% to 1.5%, in 2018 from 1.6% to 1.3% and in 2019 down from 1.7% to 1.6%. The ECB says that a very substantial degree of monetary accommodation is needed because inflation remains low.
The ECB also mentioned that the potential for lower rates from this point is rather low and that it retains the right to increase the size and duration of its bond buying program. There were also positive news regarding the Euro-Zone Gross Domestic Product as its reading was 1.9% vs estimate of 1.7% for the 1st quarter of the year on yearly basis, while on a quarterly basis also the reading of 0.6% was better than the forecast of 0.5%.
This robust GDP growth for the Euro-zone shows increased economic activity and expansion with not any severe inflationary signs. So we have mixed news, positive for the Euro in terms of GDP growth, and negative as low inflation will not lead to higher interest rates soon. EUR/USD fell from 1.1268 to 1.1193.
US Dollar
The weekly Initial Jobless Claims were reported at 245.000 higher than the expectation of 240.000 and this is negative/bearish for the US Dollar as it shows more people filed for unemployment benefits for the first time.
The weekly Continuing Claims however were reported at 1917.000 less than the expectation of 1920.000, which is bullish for the US Dollar. With these mixed signals about the labor market the US Dollar rose against the Swiss Franc, the Japanese Yen, and the British Pound and slightly fell against the Canadian Dollar.
Oil prices were almost flat and gold prices were down, so the US Dollar strength could be partly attributed to these.
Economic calendar key data for Friday 9th June 2017
The forex market will focus on the outcome of the UK’s General Elections and also on several economic data related to the economy of the UK, such as the Industrial and Manufacturing Production, plus the Trade Balance.
There are also some economic data for the German economy, and the important news about the Unemployment rate of Canada. We expect volatility for GBP/USD and USD/CAD pairs.
