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Friday, May 11th
The GBP/USD pair remains pressured at the end of the week after yesterday’s volatile session, as markets continue to digest the outcome of the BoE meeting. As it was widely expected, yesterday the UK’s CB left its interest rate unchanged at 0.5%, which was caused by a series of weak British economic data. In additional to that, all MPC members agreed that any further increases in rate are likely to be at a gradual pace and to a limited extent. And finally, during its meeting the Bank lowered its near-term forecasts on inflation and GDP. All these developments exerted considerable pressure on the pound, forcing the pair to refresh its 4-month lows below the level of 1.3500. Now markets expect for a rate hike sometime in August or November, but it will be possible if UK's economic situation improves significantly. However, the pair managed to turn around and recovered some positions above its psychological level of 1.35, following another disappointment of Thursday – weak US inflation data, which forced US bulls to take a breather and allowed the major currencies to correct higher against the greenback, including the pound. But today, nothing much is scheduled in the data calendar, so investors will continue to digest recent economic events, thereby forming near-term trajectory of the pair.
The EUR/USD pair was following broad market trend and was consolidating its positions near the level of 1.1900 during the Asian session. The main driving factor across the market again remains the greenback price dynamics after yesterday’s weak US inflation data. The retreat of the US dollar gave an oxygen to the market, allowing the pair to recover some ground. Moreover, the US dollar received some additional pressure, as weak US macroeconomic data lowered odds of an additional rate hike this year, thus decreasing the divergence between the Fed and ECB somewhat. Yesterday the pair tested the region of the 1.1950, but returned to the level of 1.1900 in early Europe on the back of attempts of the US dollar to recover after yesterday’s decline. Looking ahead, today the economic calendar will bring us only the speech of ECB President M. Draghi, therefore the broad market trend will remain in the status of a key navigator of the pair at the end of this week.
The USD/JPY pair recovered part of its recent losses, caused by yesterday’s disappointing US CPI figures. Yesterday the pair came under notable bearish pressure, following much-awaited US inflation report, which failed to match markets expectations, sending the pair to the region of 109. However, the pair recovered its bullish tone and bounced off its recent lows, as divergence between the CBs continues to support the pair. On the data front, the US economic calendar will offer investors only secondary data reports, which will have limited reaction, so the pair will continue to follow broad market trend, partially determined by recent US macroeconomic data.
The NZD/USD pair consolidates its yesterday’s gains within the range of 0.6955-75, as several factors influence the pair this Friday. Recall, earlier this week the pair received strong bearish impetus, triggered by dovish outcome of the RBNZ meeting, where the Bank stated that it would continue to adhere to accommodative policy, as NZ inflation remains below the target level of 2%. However, on Thursday the pair managed to turn around, after meeting the support level of 0.6902, due to disappointing US inflation figures, which lowered chances of fourth Fed rate hike in 2018, thus stalling bullish rally of the greenback. In the day ahead, the US dollar price dynamics will remain the key determinant for the pair, as the data calendar won't offer us anything relevant at the last working day of the week.
Major events of the day:
Canada Employment Change – 15.30 (GMT +3)
ECB President M. Draghi’s Speech – 16.15 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1797 R. 1.2005
USDJPY S. 108.84 R. 110.28
GBPUSD S. 1.3372 R. 1.3688
USDCHF S. 0.9964 R. 1.0088
AUDUSD S. 0.7413 R. 0.7599
NZDUSD S. 0.6871 R. 0.7025
USDCAD S. 1.2671 R. 1.2909
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