Holidays in UK and US will compress busy trading week
The US dollar is regaining momentum after the Commerce department upgraded its first quarter GDP estimate from 0.7 percent to 1.2 percent. The U.S. Federal Reserve was already considering the slowdown a transitory one as per the minutes from its May meeting that were released on Wednesday. US political risk is keeping the USD from taking off as the Russian connection probe is now targeting Trump’s son law Jared Kushner. The price of gold has risen as investors look for a safe haven during times of turbulence.
The GBP has dropped following the results of election polls are showing Labour has narrowed the Conservative lead with less than two weeks to go before the snap election on June 8. The questionable handling of social benefit reductions and the uncertainty following the Manchester attack have rocked the political narrative. Conservatives are still expected to win a majority, but will not come unscathed ahead of upcoming Brexit negotiations that could set the UK for a different economic reality.
The Memorial Day holiday in the United States and the Spring Bank Holiday in the UK will keep market action subdued on Monday. US economic released will be shifted to accommodate the shorter week. The ADP private payrolls report will be released on Thursday, June 1 at 8: 15 am EDT, followed by weekly unemployment claims at 8:30 am EDT, ISM manufacturing PMI at 10:00 am EDT and weekly crude inventories at 11:00 am. The U.S. non farm payrolls (NFP) report will be published on Friday, June 2 at 8:30 am EDT. Employment has been the strongest pillar in the recovery of the US economy with the Fed looking more closely at the wage component for signs of positive inflation ahead of the June FOMC meeting.
The EUR/USD gained 0.173 percent in the last week. The single pair is trading at 1.1196 after the USD is making a late charge on the back of an improved first quarter GDP reading. The second estimate revised the growth of the US economy from 0.7 percent to 1.2 percent. The GDP is still lower than the 2.1 percent average since the end of the recession but is now more in line with the lack of momentum at the beginning of the year that picks up speed. The US Consumer sentiment was revised slightly to 97.1 as the index has slowly retraced since January.
The June Federal Open Market Committee (FOMC) meeting is fast approaching and Fed speakers have for the most part been supportive of more rate hikes. The market has increased the probabilities it is pricing in for the June FOMC and is close to 90 percent with only the NFP report as a potential, but long shot, to derail a rate increase in June.