By Enrique Diaz-Alvarez, Chief Financial Risk Officer of International Payment Company Ebury

The dollar fell to a new low of ‘release day’ as the pressure on the Fed reduce interest rates. This pressure comes from both the Trump administration – which makes it increasingly clear that it does not believe in the independence of the central bank – and from the weakest tone of financial data in the US. In the positive way, there is no continuation of the worrying trend “Sell America” ​​that had upset markets in April. On the contrary, the US shares record new historically highs, and the bond market is still maintained. However, the dollar again acts as a “decompression valve” for commercial tensions, and last week it fell sharply against almost all basic coins.

Two financial announcements will be at the center of attention next week. On Tuesday, the preliminary report on inflation in the eurozone will shed light on whether the ECB has room for new interest rate cuts. In the US, a series of labor market announcements starting Wednesday with Jolts jobs will culminate on Friday with the important June payroll report (Payrolls). Much of the recent dollar weakness is attributed to the perceived weakening of US financial data. The employment report will confirm or deny the theory of substantial deceleration in the US. Significant moves are expected in foreign exchange markets as a reaction.

Sterling

PMI indicators for June’s business have slightly exceeded expectations, thereby contributing to the denial of pessimism caused by the recent bad picture of employment and retail sales in the United Kingdom. As a result, the pound managed to keep up with the other European coins amid the general dollar fall – in strong contrast to the recent undermill. This week there are no significant data from the British economy, so the pound’s march will be determined mainly by developments elsewhere, as the Bank of England’s stance is expected to clarify in terms of new interest rate cuts.

Euro

The May PMI indicators in the eurozone did not substantially change the image of a marginally growing economy that is currently based on the expectation of strong fiscal stimulation by Germany later within the year. However, this does not seem to prevent the euro’s upward trend against the dollar, as investors’ risen flows over -US -dominated in US assets are combined with the shrinkage of interest rates between the US and Europe. Tuesday’s inflation report will show whether there is a real chance for the ECB to further reduce interest rates from current 2%level, which is lower than inflation for the first time in many years.

US dollar

The financial data of the previous week showed a mixed picture. The weak data on building permits and low income and expenditure sizes were offset by the reduction of new unemployment benefits and strong orders of lasting goods. Overall, the tone of recent weeks remains mild, but not decisive. The data on the labor market this week is expected to play a critical role in clarifying the situation. At the same time, we are closely monitoring the developments around the budget in the US. The negotiations are intense, and a possible failure would mean significant fiscal tightening from next year. However, we consider it to be a low probability scenario.