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Market Wrap
The US Labour Department unveiled on Thursday that the number of Americans filing initial jobless claims in the United States declined 92K to 498K marking the lowest level since March 2020. COVID-19 vaccinations are allowing the USA to gradually reopen, and government stimulus is boosting demand.
In a sign of improving employment conditions the 4-week moving average dropped 61,000 from the previous week’s revised average to 560,000.
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The US dollar index declined today from the European open and continues to depreciate into the London close, with the first logical target the 29th of April low print of $90.385 before it tests the yearly lows.
Earlier today the Bank of England kept its monetary policy unchanged during its MPC meeting but announced a slowdown in the pace of their purchases of British government bonds. The BoE has raised their 2021 GDP forecast sharply to 7.25% citing easing restrictions on economic activity and the country’s fast rollout of COVID-19 vaccinations. The Bank of England Governor Andrew Bailey argued on Thursday that the inflation in the United Kingdom will be “a bit bumpy” in 2021, and that “We currently think the policy setting is appropriate. We have got a forecast that has a very substantially strong bounce back but thereafter it comes back more into balance.”
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The British pound continues to trade within a tight range but has taken the highs for the week, so opens up further upside now towards the 1.4000 range high. With the weakening US dollar there is growing energy building the longer this pair stays in a relatively small trading range.
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Tomorrow is the widely anticipated Non-Farm Payrolls report which is expected to print around 978K new jobs. The market will inevitably go quiet for the remainder of today’s New York session and be again subdued as we get closer to the data print. The EURUSD has now formed a swing low, so indications are that it is likely to go higher, with the biggest risk of a reversal of today’s actions coming in on a very disappointing NFP data reading.
The ActivTrader sentiment indicator does show 68% of traders bearish the EURUSD, so I am expecting these traders to get squeezed higher.
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Copper continues to rise as depreciating inventories stand at levels last seen 15 years ago while worldwide economic stimulus helps lift higher demand for metals. Copper has taken out Aprils high and shows no sign of turning around.
