USD Tight Range; Volatility Pending

The USD was stuck in a tight range this past week and it staged reversal threat. Monday is a holiday in the United States which means that the markets are highly illiquid and conditions are unfavorable for Forex trading.

The week immediately picks up with major releases out of the USA. Pending releases for the week of May 29th include ISM Manufacturing numbers, the PCE deflator which is the Fed’s favorite inflation indicator, and the consumer sentiment survey, culminating in the monthly Non-Farm Payrolls report on Friday. All these events should create sizable movement with the Greenback and set the stage for June.

Political Risks

The lingering political uncertainty also threatens to derail if not set the greenback currency on a downward spiral after its recent nascent recovery. Political risks cannot be ignored as a rancor at the G7 leaders meeting over the weekend and a steady stream of news flow on the investigation into the Trump camp’s Russian connection during the elections may keep markets on edge. In turn, that may hurt demand for USD-based assets and pressure the greenback currency.

International Outlook

European data has given the currency some strength even with the inconsistency of the ECB. Inflation prints that are set to be released next week might just add fuel to the already burning currency.

GBP Bearish Break

The GBP/USD had been bringing in one of its smallest monthly ranges in history after it posted a sizeable bearish break with its biggest drop since early this year (January 18). Reports surfaced that Theresa May’s lead had dropped from an advantage of 24 percentage point to merely 5 percent point. Looking back and learning from recent history, given the surprise that the Brexit generated and the turn out of the US elections, it is likely that the Forex market will take time before it responds to these polls and this, experts believe will spell more volatility for the sterling.

AUS: Australian Dollar May Wobble If Housing, China Data Disappoint

The AUS could land in more trouble this week if the local housing data and the Chinese manufacturing numbers continue their recent trends of disappointment

German CPI data.

Tuesday morning begins with the release of German CPI data and this has raised issues in Europe as the CPI remains at an elevated rate with annual inflation already at the ECB’s set threshold of 2%. With this inflation percentage, many in Germany are already looking forward to the end of QE. This has, in turn, led to the recent theme in the EUR as many investors try to get ahead of any taper that is to come.

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