Asian trading before the opening of Europe was multi-directional amid the moderately positive dynamics of US futures on major stock indexes. As pointed out earlier, investors continue to show restraint ahead of this week's publication of important data on US employment, which will clearly affect the dynamics of the markets.
However, the main focus for today will be the release of production data in both Europe and the United States. So, the focus will be on the values of business activity indices in the UK manufacturing sector, which is expected to remain at the same level of 66.1 points. On the other hand, German business activity is expected to decline from 66.2 points to 64.0 points, while the Euro area desires to maintain the same dynamics of 62.8 points. As for the expected values in the US, no changes are expected compared to the previous period – 60.7 points.
In addition to this important news, the market will also focus its attention on the publication of EU's consumer inflation, which is expected to rise from 1.6% to 1.9%, Germany's employment in and Canada's GDP for the 1st quarter. Fed members Brainard and Quarles and Bank of England Governor Bailey will also make a speech.
In general, today will be quite eventful in terms of news. How strongly can all these events affect the dynamics of the markets?
We believe that only noticeable changes in the downward direction – production indicators or on the contrary, growth, can revive the financial markets, and even then not for long. It is also worth noting that the newsmaker is still the US whether we like it or not. The movement of the markets will depend on how the national economy will recover there in view of the COVID-19 pandemic and the ongoing compulsory vaccination of citizens against this infection. If these production indicators manage to be higher than the forecast, it will push the local demand for risky assets up and put pressure on the US dollar. However, these movements will be limited, since the main news this week will be the publication of the number of new jobs that the US economy received in May.
Overall, we continue to expect fair movements in all markets – stock, commodity, and currency until Friday, when unemployment data will be published.
Forecast of the day:
The EUR/USD pair remains in the range of 1.2160-1.2260. If the Eurozone's inflation increases and the PMI in the manufacturing sector turn out to be positive, it can raise the pair again to the level of 1.2340, but only after breaking through the level of 1.2260.
The USD/CAD pair is consolidating in the range of 1.2020-1.2140 in anticipation of the release of Canadian GDP data and American news. If the data does not disappoint, and the growth of the oil price does not stop, we can expect the pair to exit the range down and decline to the level of 1.1920.