Market expectations for Thursday/Friday

This Thursday, the U.S. will celebrate Independence Day, investors in Europe will focus on the European Central Bank decision to cut base rate or not. Most market participants do not expect interest to be cut, but it is expected that the M. Draghi (the president of ECB) will continue to highlight the main goal - to maintain low interest rates in the Euro zone.

 
On Wednesday primary producer confidence index of July in the Euro zone will be published. It is expected that it will remain the same as in May, and reach 48.6. This reflects market expectations that the greater part of manufacturers in the Euro zone still sees signs of market contraction.

Bank of England decisions

On Thursday, the Bank of England, as well as the ECB will announce a decision on the base interest rates. Market participants also expect that the base interest rate would be reduced, which currently stands at 0.50 percent. However, investors will closely monitor the press conference which will be held after the meeting. For the very first time, New England's central bank chief Mark Carney will speak publicly. He was the leader of Canada's central bank for more than five years.

U.S. expected labor market indicators

While the U.S. markets will be closed on Thursday - the country will be celebrating Independence Day - market participants wait for the first quarter U.S. macroeconomic data announced. Without a doubt, the most important of them will be published on Friday - the U.S. labor market data. Analysts believe that in June new jobs were created in the U.S., but slightly less than in the month of May, 165 thousand. And the unemployment rate was down from 7.6 percent. to 7.5 per cent. It is expected that these figures reflect the current U.S. Federal Reserve System (FED) position that the U.S. unemployment market is slowly recovering, and sooner or later the Fed should begin to reduce U.S. economic stimulation.

No surprises from Central Banks

ECB and BOE delivered their rate decisions yesterday and market wasn't surprised by the results. There was some suspicion as to whether European Central Bank would cut interest rate or not, but as we see they did not do it. Furthermore, the sentiment was that Draghi will speak in dovish tone and he did not. So, eur/usd rallied immensely and so did gbp/usd.

If you look at price action today you see sharp corrections taking place. gbp/usd is down by more than 100 pips and eur/usd about 75. And commodities lost almost everything they have gained.

Today is no less important day than it was yesterday. We have job data coming from both Canada and United States. So, you should not be surprised by consolidations taking place in both the greenback and the loonie. Let's see what today brings.

Bullish fundamental facts from Europe

ECB expressed its’ ‘sincere’ desire to address the European crisis and is again willing to do anything it takes to stabilize the region’ economy. These comments after interest rates announcements are very important as they usually give momentum for currencies at least for a few weeks. These are periods of time when a trader can accumulate a big position in a currency that is about to strengthen and keep it for a few weeks to make nice profits. That is exactly what happened in eur/usd or eur/jpy pairs. These macroeconomic news put Euro back on its’ uptrend and this tendency of Euro strength may continue for a few weeks.

I will repeat myself again that one should only trade in the direction of the main trend and never against it. So, after ECB and BOE announcements of interest rates have been made one can expect Yen and US dollar to weaken and Euro, Pound and commodity currencies to strengthen. Just be sure not to risk too much, nor to overtrade. These things never increase your profits. Vice versa, it impedes you to take the best possible trades that are on the table. Stay patient and try adding to your position on dips.