“We need to be patient because we know the labor market slack is actually tightening, the output gap is closing,” said Mario Draghi in reference to the lower wage increase which is tampering inflation.
The UK Services PMI fell to 53.8 in May, below market expectation of 55.00, the lowest level since February. At the same time, the UK Manufacturing Production rose less than the market expectation in April to only 0.2% growth singling concerns over the UK economy’s strength. The nail in the head for the GBP/USD was the UK election results shocks which have been the catalyst for a violent sell-off in GBP/USD trading at a low of 1.2634.
The Australian GDP growth of 0.3% was the slowest reading since 2009 but the 1.7% annualized rate beats market expectation which has sent AUD/USD above the big psychological number 0.7500. The RBA has also kept the interest rate at historic low levels of 1.5% amid concerns over "slow growth in real wages."
The USD/JPY took another beat during the last week in part due to subdued US economic data. The ISM Non-Manufacturing PMI missed market expectation of 57.1 and come lower to 56.9. The US Unemployment Claims also rose to 245k which has sent USD/JPY below the big round number 110.00 but later it recovered and erased part of the losses just to finish the week few pips above 110.00.
The Russian Ruble continued to remain supported despite the recent slide in Crude Oil price. The USD/RUB spiked to 55.1649 a level not seen since July 2015 but the sell-off was quickly bought due concerns over rising US crude oil output which is poised to hit 10 million barrels a day by 2018.
Due to the broad-based dollar strength Gold prices has taken a hit. After successfully breaking above a major trend line that connects the highs starting from 2011 high the rally has quickly faded way and Gold finished the week near the weekly low of $1264.50.
The US stock market index, S&P500 broke to a new all-time high of 2445.50 but couldn’t sustain the gains and finished the week lower than where it started at 2414.50. The catalyst behind the sharp late Friday sell-off was the weakness in the technology sector.