Global Themes

The U.S. dollar rallied almost 1.6% across the board against a currency basket on Friday, after blockbuster U.S. jobs data caused markets to pull forward expectations on when the Federal Reserve might raise interest rates for the first time in nearly a decade. The case for a Fed rate hike as soon as September increased on news that the world’s biggest economy added 280,000 jobs last month, the most all year. The dollar lost some of its jobs-inspired gains on Monday, however, on reports that  the U.S. administration voiced some concern over a strong currency which was a contributing factor in the economy’s slow start to the year. A big focus in the week ahead will be the U.S. consumer with retail sales due Thursday and consumer sentiment on Friday. Consumers have turned frugal recently so better news this week would speak better about the outlook for growth and help improve the case for a Fed rate hike later this year.

CHF

Switzerland will publish their latest inflation report on Tuesday June 09 at 08:15 and expectations are for a drop in inflation from -1.1% (y/y) to -1.2%. Weaker inflation could increase pressure on the Swiss National Bank to either introduce new monetary easing or increase FX intervention to weaken the Swiss franc. The safe haven franc has appreciated because of Greek debt worries and the SNB says the currency is highly overvalued.

EUR

The Euro was down almost 2% against the US dollar at one stage on Friday after much stronger-than-expected US economic data. However, the EUR gained more than 3% against Sterling last week after a jump in Euro Zone inflation data underlined bets on a quicker economic recovery in Europe. Tuesday’s revised Euro Zone Q1 GDP data at 10:00 may bolster these bets.

USD

All eyes will be on Thursday’s US retail sales data at 13:30 - the final top tier US economic report before the Federal Reserve’s June 17 interest rate announcement. Friday’s impressive US jobs data has impacted not only the US dollar, but also US bonds and future interest rate expectations. Currently markets are shifting into a more hawkish Fed mindset which favours a stronger USD.

GBP

Last week’s unexpected drop in Britain’s latest services PMI report raised concerns about the pace of the UK economic expansion. The pound last week lost more than 3% against the Euro as a result before Mark Carney’s Mansion House speech on June 10. On Wednesday at 20:45 BOE Governor Carney will discuss the UK’s economic and interest rate outlook.

NZD

The Reserve Bank of New Zealand will make its next rate decision overnight on Wednesday. The kiwi dollar could rebound if the RBNZ dampen expectations that it could cut interest rates because of weaker consumer demand and inflation. GBP/NZD is trading at 2011 highs.