US Dollar Starts The Week Steadily, BoE Rate Statement in Focus

Market Reviews

Markets remain calm at the beginning of the week. The US dollar is trading near the peak of 2018, after jobs data, which was published on Friday, turned out to be weaker than expected, but still strong enough to support the arguments in favor of further increase in Fed interest rates.

A report from the US Labor Department showed that employers added 164.000 jobs in April, and the unemployment rate fell to 3.9% from 4.1% a month earlier, reaching its lowest level since December 2000. Economists had expected 192.000 new jobs in April, and the unemployment rate fell to 4%. The data did not change the idea that the Federal Reserve is likely to raise interest rates at least twice, and perhaps three times, by the end of the year.

The Australian dollar declined from the start of trading, but soon regained lost ground after the publication of the National Bank of Australia's report on business confidence. According to the report of NAB Group, the index of business conditions increased by 6 bps to +21, which is the highest since the beginning of the survey in March 1997. The index of business confidence also increased by 2 bps to +10 points, significantly exceeding its historical average of 6 points.

The main focus this week will be on the US CPI data and meetings of the Bank of England and RBNZ. The both banks are awaited to keep rates steady. BoE is expected to keep bank rate unchanged at 0.50%, while the RBNZ is also forecast to keep the official cash rate unchanged at 1.75%.

The UK inflation remains above 2% but has been easing back, and some further softening is expected over the coming months. The pace of activity has been easing off, including a step down in GDP growth to a lower than expected 1.2% in March (versus 1.4% in December).