WEEKLY REVIEW: Mixed picture of the U.S. economy
06.05.2016, 16:24

WEEKLY REVIEW: Mixed picture of the U.S. economy

The U.S. labour market data was in focus this week. The pace of the job creation slowed in April, while wages rose slightly. Other U.S. economic data remained mixed.

Some Fed officials said this week that they could support an interest rate hike in June if the U.S. economy continued to improve. But there is a problem. The Fed's next monetary policy meeting is scheduled to be on June 14-15. But there is a 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, it is unlikely that the Fed will raise its interest rate in June.

If the U.S. economy does not improve significantly in May, it is unlikely that the Fed will hike its interest rate as it said that the interest rate decision will depend on the incoming economic data.

The Organization of the Petroleum Exporting Countries' (OPEC) meeting in June could also have an impact on the Fed's interest rate decision. If OPEC does not agree any measures to stabilise the oil market, oil price will likely decline, easing inflation pressures in the U.S. The rise in inflation is one of the Fed's conditions for an interest rate hike.

The euro declined slightly against the U.S. dollar this week compared to the last week, but remained fairly strong. If the euro rises against the U.S. dollar further, it will have negative impact on the economic recovery in the Eurozone as manufactured products in the Eurozone will be more expensive abroad and will weigh on the exporters. The European Central Bank will be forced to act.

It is likely that the currency pair EURUSD will rise toward the high of May 03 at $1.1615, 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 support level at $1.1300 or $1.1200.

  • Name: Konstantin Meinhardt
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