Not for the first time and certainly not for the last, the initial dollar reaction to the US employment report failed to be sustained through the remainder of the trading session on Friday. This was most evident on EURUSD, with the initial move down below the 1.18 level being reversed within 90 minutes of the release to put it above the 1.1860 level once the Asian session was underway today. The broader reversal of dollar strength last week was also in evidence again the Aussie and yen, with USDJPY starting the week not far off the lows made last week just above the 118.00 level. The parallels with last year are fairly strong, with seemingly the whole world bullish the dollar, a trade that did not start to bear fruit until the latter half of July. We continue to take a more constructive view of the dollar, seeing it higher, but in a far less uniform and linear manner.
This week, it is inflation data in the UK tomorrow that it one of the key releases on the majors. The headline rate has been falling and is poised to break below the lower end of the 1% – 3% band set by the government. The market looks for a 0.7% headline reading. Elsewhere, retail sales data for the US is seen on Wednesday, together with US CPI inflation on Friday. Beyond FX, the oil price continues to push lower, Brent below the 50 level again this morning and making new lows for the year.