Fasten Your Seat belt For An Eventful Week
Welcome to the first trading week in June which promises to provide heightened volatility given several high-risk events such as Central Bank rate cuts on Wednesday and Thursday and the U.S. Labor Market report on Friday.
The Bank of Canada could take the lead in terms of cutting interest rates when it meets on Wednesday.
Following the BoC, the European Central Bank is widely expected to cut rates this month but many have cautioned restraint in getting ahead of things thereafter. The June rate cut may prove to be a ‘hawkish cut’ or a cut followed by a clear desire to implement a slow and steady approach to future rate cuts. Markets still price in two 25 basis point cuts with a decent chance of a third towards the end of the year.
The Federal Reserve, on the other side, has pushed back on U.S. rate cuts over the past months as inflation remains uncomfortably high. The focus will therefore be on the latest U.S. jobs data, while any weakening in the jobs market may lead to a re-pricing of Fed rate cuts.
EUR/USD: The pair was able to hold above 1.08. We will pay attention to price breakouts either above 1.09 or below 1.0760.
GBP/USD: The cable surged to a high of 1.28 last week from where we saw a slight correction. As long as the pound trades above 1.26, the focus remains on a break above 1.28 with a higher target at 1.29.
DAX: The index corrected after hitting a record high at 18932. The uptrend remains intact but if the DAX drops below 18400, we see a next lower target at 18200.
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