The U.S. dollar was supported last week by comments of several Fed officials, who noted that the Fed could raise its interest rate in June or July. The Fed Chairwoman Janet Yellen said last Friday that an interest rate hike would be likely appropriate "in the coming months".
But the U.S. dollar dropped today on the weak U.S. labour market data. The U.S. economy added 38,000 jobs in May, missing expectations for a rise of 164,000 jobs, after a gain of 123,000 jobs in April. It was the smallest rise since September 2010.
The U.S. unemployment rate fell to 4.7% in May from 5.0% in April, the lowest level since November 2007, but the decline was driven by a fact that people dropped out of the labour force.
The Fed said that it would raise its interest rates if the labour market continues to strengthen and if inflation is picking up toward 2% target. Inflation is now supported by a rise in oil prices, but the job creation seems to lose momentum.
I think that it is unlikely the Fed would raise its interest rate in June due to the weak U.S. labour market data and ahead of the referendum on Britain's membership in the European Union (EU) on June 23 as Britain's exit from the EU would have a negative impact on the U.S. economy.
The likelihood for an interest rate hike in July declined after today's release of the weak U.S. labour market data. If the labour market data in June remains weak, the Fed will unlikely raise its interest rates.
OPEC meeting on Thursday ended without any deal. OPEC members seemed to be content with the current price level. Oil prices rose in the recent weeks due to the oil supply disruptions and falling output in the U.S.
It is likely that the currency pair EURUSD will rise toward the high of May 11 at $1.1445 or the psychological level at $1.1500, if there are negative news from the U.S. and there are no negative economic data from the Eurozone.
If the U.S. economic data is better than expected and in case of the negative economic data from the Eurozone, the currency pair EURUSD may test the psychological level at $1.1200.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2020 TeleTrade-DJ International Consulting Ltd
TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.