Dow Jones, US Dollar, USD/CAD, Euro, ECB, Inflation, Canadian Jobs Report

Investors hit the sell button going into the weekend after a rosy US non-farm payrolls report that saw the United States add 390k jobs in May. That was above the 325k economists expected, according to a Bloomberg survey. The report fueled already strong Federal Reserve rate hike bets. Overnight index swaps are pricing in 50-basis point hikes at the Fed’s next two meetings, and an 84% chance for a 50 bps hike at its September meeting. The US Dollar halted its two-week losing streak, rising nearly half a percent on the week. Equities responded in kind to those firmed up bets, with the Dow Jones Industrial Average shedding around 1%.

The Canadian Dollar gained ground for a third week versus the Greenback, inspired by strong oil prices and the Bank of Canada’s aggressive outlook on rate hiking. Analysts have largely turned bullish on the Loonie–per a recent Reuters poll, with CAD expected to gain 0.4% versus USD over the next three months. Canada is set to report April trade data and jobs numbers for May in the week ahead, which may give rise to some volatile price swings in USD/CAD.

Oil prices—across the WTI and Brent benchmarks—rose despite a move by OPEC and its allies to increase production by 648k barrels per day in July and August. That, however, failed to assuage supply fears across the energy market. Those supply concerns were bolsters after the United States reported a larger-than-expected inventory draw. The EIA said crude inventories fell by 5.07 million barrels for the week ending May 27, well over analysts’ expectations of around -1 million barrels.

Elsewhere, copper prices in New York recorded the strongest gains since February. Dour production reports out of Chile (a major copper exporter) pushed prices higher, supported further by China rolling back Covid restrictions. While Shanghai’s restrictions were indeed relaxed, the situation remains precarious, given the political backdrop around China’s “Zero-Covid” policy. A manufacturing report from the National Bureau of Statistics (NBS) revealed that the country’s manufacturing sector continued to contract in May, albeit at a slower pace than the prior month. Inflation data for May is due out on June 10, an event that may prove to inject some price swings across the market as traders gauge global inflationary pressures.

The Euro is set for a pivotal moment this week by way of the European Central Bank’s policy decision, set to cross the wires on June 09. EUR/USD slipped slightly following two weeks of gains despite inflation in the block hitting its strongest levels in over 20 years While calls for a more aggressive 50-bps hike in July have grown, Ms. Lagarde is likely to outline plans for a modest set of 25-bps hikes moving forward. That said, if the ECB chief signals a more hawkish narrative, it may send the Euro higher. Rising inflation targets may also bolster the European currency.

US DOLLAR PERFORMANCE VS. CURRENCIES AND GOLD

Fundamental Forecasts:

Pound Fundamental Forecast: UK Gov Support Provides Room for BoE Hikes

The UK Government’s £15 billion support for lower income households bolsters the Bank of England’s rate hike path as it endeavors to reign in inflation.

Australian Dollar Primed to Move on RBA, Swinging Risk Appetite

The Australian Dollar looks primed for volatility. An expectant mood ahead of the upcoming RBA policy update may compound sensitivity to seesawing risk appetite trends.

Weekly Crude Oil Forecast: OPEC+ Supply, US Dollar and Economic Data in Focus

Crude oil has managed to end the week on high leaving next week open to fundamental forces from both supply and demand-side factors and a resurgent USD.

US Dollar Fundamental Forecast: USD May Rebound Room for Expected CPI Cooling

The US Dollar moderated following multi-week losses. Traders have US CPI data in focus, but a weaker-than-expected print is unlikely to cool Fed rate hike bets. That may keep the US Dollar firmly supported.

S&P 500 Forecast for the Week Ahead: Inflation Data to Make or Break the Market

The May US inflation report will be key for the S&P 500 next week. For sentiment to improve meaningfully, the data will have to show that inflationary pressures are easing at a rapid pace.

Gold Price Outlook: XAU/USD May Fall as Markets Pivot Back to Inflation Woes

Gold prices remain vulnerable after a solid US non-farm payrolls report underscored the Fed’s confidence in the economic outlook. All eyes are on the next US inflation report.

Technical Forecasts:

Euro Technical Forecast: EUR/USD Averts Meltdown- But for How Long?

Euro surged more than 4.2% off the yearly lows against the Dollar with EUR/USD now eyeing technical downtrend resistance. The levels that matter on the weekly chart.

S&P 500, Nasdaq 100, Dow Jones Forecast for the Week Ahead

Stocks appear to still have some upside left in them in what is considered a bounce phase in a bear market.

AUD/USD Clears May High to Test 50-Day SMA for First Time Since March

The break above the May high (0.7266) raises the scope for a further advance in AUD/USD as it tests the 50-Day SMA (0.7227) for the first time since March.

US Dollar Technical Forecast: EUR/USD, GBP/USD, AUD/USD, USD/JPY

The US Dollar finally found some support after a two-week sell-off, but next week brings inflation data and the week after brings the Fed. Buckle up for a busy economic calendar ahead.

—Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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