Could Draghi’s Departure Spark a Change in European Sentiment Ahead of a Potential Economic Slowdown?

The euro was the main benefactor yesterday as the ECB President, Mario Draghi, managed to deliver dovish news in a positive tone. He ruled out any chance of an interest rate hike in the next year and even suggested the door was open was additional cuts should the global trade war and Brexit starts to impact European growth. However, markets were expecting an even more dovish statement which consequently sent the euro higher across the board, particularly against the dollar where it is on course for its best weekly performance since last September.

The Central bank is facing a new wave of uncertainty, as financial markets worry that the various U.S. trade conflicts might turn into something worse. The labour market in the eurozone remains strong, and economic activity in its services and construction sectors is solid. But the risk of protectionism is taking a toll on manufacturing. The ECB has revised the year’s growth forecasts marginally upwards, but it downgraded estimates for 2020 and 2021. Inflation concerns are lagging the bank’s target of just below 2 percent. While Draghi noted this was a global phenomenon and that there was no risk of deflation, he recognized that the ECB needed to address the problem.

Across the pond, the US The economy has been expected to have added a solid 180,000 jobs in May, but if the payroll number is much stronger or weaker than forecast, that could be a game changer for the markets and any consumers or businesses looking for a loan. Coming amid a huge shift in expectations for Federal Reserve interest rate cuts, economists say a big miss either way in Friday morning’s May employment report could have a profound impact on markets and help decide the timing of the first Fed interest rate cut in more than 10 years.

Economic Calendar

Expected Previous
12:30 USD Average Hourly Earnings (YoY) (May) 3.2% 3.2%
12:30 USD Nonfarm Payrolls (May) 185K 263K
12:30 USD Unemployment Rate (May) 3.6% 3.6%
12:30 USD Labor Force Participation Rate (May) 62.9% 62.8%
12:30 USD Average Hourly Earnings (MoM) (May) 0.3% 0.2%
12:30 CAD Unemployment Rate (May) 5.7% 5.7%
12:30 CAD Participation Rate (May) 65.8% 65.9%
12:30 CAD Net Change in Employment (May) 8.0K 106.5K

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.