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Eurozone PPI below market predictions continues to justify ECB rate hikes; FOMC minutes and Nonfarm Payrolls report in focus


US equity market remained closed yesterday due to the US Independence Day holiday, but the cautious mood ahead of this week’s Monetary Policy Meeting Minutes from the Fed and the European Central Bank has exerted bearish pressure on investors’ sentiment. The futures for the US equity index and European bonds fell as investors worried that a faster pace of monetary tightening from global central banks will slow economic growth. Therefore, the economic fears kept the risk profile weak, which in turn helped the US dollar to remain upside momentum.

On the economic data side, the Producer Price Index from Eurozone rose 0.6% in May and came in weaker than the market’s expectations of 1%, which continues to warrant rate hikes from the European Central Bank. The dismal European data undermined demand for the Euros meanwhile the energy crisis also acted as a headwind for the shared currency amid the Russian invasion of Ukraine. The market focus now shifts to the FOMC minutes of its latest meeting on Wednesday and the Nonfarm Payrolls report on Friday, as market participants expect that the Fed elevated its interest rates by 75 basis points in its June monetary policy meeting.

Main Pairs Movement

A slow beginning to the week, as US markets were closed due to the Fourth of July Holiday. The DXY index was also in the mood of holiday during the first half of Monday and stay steadily around 105.1, and then gained some strength by the end of the day, reaching 105.198, but the action was limited as some traders stayed away from their desks.

GBP/USD was surrounded by bullish momentum at the start of Monday, even reaching a daily high around 1.2154, but then lost its bullish traction and fell to around 1.2105, since Brexit woes undermined demand for the Pound. At the same time, EUR/USD got a rebound from last Friday’s low of around 1.039 to a daily high of around 1.045 at the middie on Monday, but then Dismal European Data undermined demand for shared currency, and EUR/USD closed by 1.0425.

Gold continued the rebound momentum gained from last Friday’s daily low below $1786 and managed to reach above $1812.5, but then fell below $1805 as the expectation of a hike in interest rates makes gold less attractive.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
GBPConstruction PMI (Jun)16:3055
USDISM Non-Manufacturing PMI (Jun)22:0054.3-
USDJOLTs Job Openings (May)22:0011.000M

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