Largely silent forex market last week leave us with high anticipation for ECB rate cut in the first week of trading in June. Volatility is expected to rise along with some other long-awaited events. The following expectations are what keeps the market on fire this week.

Largely silent forex market last week leave us with high anticipation for ECB rate cut in the first week of trading in June. Volatility is expected to rise along with some other long-awaited events. The following expectations are what keeps the market on fire this week.

ECB

1. Market Anticipation For ECB Rate Cut

Euro last week skydived into the lowest level in three months as the result of double kick from low inflation and worsening unemployment. Eurozone May inflation was recorded at 0.7%, the seventh consequent under one percent inflation. While unemployment stalled at 11.8% since the beginning of the year, just 0.2% under record high of 12% during 2013. It is undeniable that ECB will decide on doing something to loosen its monetary  policy in Thursday, June 5 meeting.

ECB governor Mario Draghi have mentioned several available options, but most analysts favor rate cut. 32 of 50 analysts surveyed by Bloomberg predicted 0.1% cut from 0% on deposit rate. It is also rumored that ECB is working on a certain long term refinancing operation.

Some other releases from the area will keep market on edge, particularly the release of Eurozone CPI and unemployment. Apart from that, there will also be PMI and GDP revision releases. The datas are generally estimated to keep up with the depressing trend; consequently, EURUSD is predicted to stay bearish. However, keeping in mind that market anticipation is already high, traders need to be cautious to the possibility of reversals if something unexpected happen.

 

2. US Treasury Bond Yields Sinks

USD movements is at high risk along with the fall of 10 Year US Treasury Bond Yields. Mid May, bond yields have fallen, but come back up slightly. However, it slipped again under 2.5% at last month closing. Investors are worried over weak economi reports, particularly on inflation and unemployment.

Changes is expected to come along with the upcoming ECB announcement and NFP releases near the end of the week. If deposit rate is cut in Europe, then the US low rate will appear more attractive. Meanwhile, NFP improvements will reestablish market sentiment toward US economic recovery. Forecast placed NFP on +215,000, while Bloomber analysts predicted +220,000 improvement. On the other hand, if NFP fell below expectation or any bad interpretation resurfaces, then USD rivals will gain advantage. 

Aside of the two, there will also be US ISM Manufacturing PMI, ADP Non-Farm Employment Change, and Trade Balance. EURUSD will predictably stay fluctuative along with other major pairs. Good bye, sideways!

 

3. Aussie's Ups-and-Downs

AUD fluctuations these days have made it a really attractive pair to work with. Some of the reasons are  weakening China influence on the currency, less consistent Australian fundamentals, and RBA insistence on keeping AUD on the low. What else we could hope from AUD this week?

Big events in Australia are RBA interest rate decision and GDP data publication. Analysts expected RBA to hold rate at 2.5%. Some even thought that RBA will jawbone AUD again in order to keep low exchange rate. On the other hand, GDP is expected to rise from 0.8% to 0.9% (qoq) and 2.8% to 3.2% (yoy).

Aside of the two events, news from the US shall influence AUD, including NFP. If you have decided to trade the currency this week, make sure that you take note of USD movements as well.

Those are market highlights for June 2-6. No surprises is expected from other majors. GBP in particular is estimated to stay bullish. Bank of England is not expected to hike rates in Thursday meeting, but high-ranking officials such as Weale and Bean have indicated wishes to do that soon. The expectation keep investor sanguine toward Sterling.

So, what are your predictions for your chosen pair? Well, whatever it is, we wish you all the best, and good luck!