A quieter start to the new week but focus stays on US data

The US jobs report on Friday didn’t turn out to be as disappointing as many were hoping for and that kept markets in check overall. The underlying trend is still pointing to added softness in the labour market though. And there’s also a slight concern with the unemployment rate ticking up despite the participation rate dropping.

As things stand, the odds of a May rate cut have eased to ~42% now but traders are seeing roughly three rate cuts by the Fed for this year. The first full rate cut is still priced in for June at the moment.

In FX, the dollar remains in a softer spot overall after the recent declines. But so far today, things are keeping steadier for the most part. USD/JPY is a notable mover having fallen to a low of 147.08 in Asia before returning to 147.60 now. The pair continues to tread water around its lowest levels since October last year as Japan bond yields continue to inch higher.

EUR/USD continues to hold above 1.0800 but failed at its attempt to get above the 200-week moving average at the end of last week. The key level is seen at 1.0865 this week and will be a line in the sand to watch out for.

Looking to the week ahead, the focus will stay on key US data releases with the US CPI report being the big one. There won’t be much on the agenda today but things will pick up in the days ahead as traders will look to the inflation numbers especially for their next gauge of the Fed outlook.

Tomorrow, we will get the JOLTS job openings, then the CPI on Wednesday, followed by PPI and weekly jobless claims on Thursday. And then we’ll round it up with the University of Michigan consumer sentiment reading on Friday.

This article was written by Justin Low at www.forexlive.com.