EUR On Down Trend Despite Positive Greek Negotiations

In what has been a relatively muted session, movements in the USD-index have been the catalyst for most of the price action in major pairs amid a lack of fundamental news. However, the market continues to watch US data very closely for any further indications on the timing of a rate hike by the Fed as the FOMC have reiterated that the subsequent timing of a rate hike is highly dependent on the outcome of upcoming data. US Factory Orders (Apr) M/M 2.1% vs. Exp. 2.0% came in above expectations, kicking off the week for the US on a firm footing ahead of Friday’s Non-Farm Payrolls which is expected to show a significant bounce back after last month’s disappointing showing of 126K. Of note, the Fed last week attributed the recent weak Q1 data to ‘transitory factors’.

After EUR/USD failed to break its 100DMA at 1.1283 on Friday, the EUR has been on a downward trend despite positive signs emanating from the Greek negotiations with a Senior Greek official stating that significant headway had been made in negotiations, this comes after Greek PM Tsipras rejigged his negotiating team placing Greek Finance Minister on the side-lines of discussions. GBP/USD has also traded steady with UK participants of the market due to the May Day bank holiday holding above 1.5100.

Ahead of tomorrow’s RBA rate decision, AUD/USD traded steady as participants continue to bring their forward rate cut expectations, with OIS pricing in an 80% chance of a 25bps rate cut to 2%. Additionally, last week Sydney Morning Herald's Peter Martin reported that due to poor economic conditions and the stronger AUD the RBA will be cutting rates at its meeting on the 5th of May. Of note, at the RBA’s last rate meeting there had been suggestions of a leaks which has prompted action from the RBA to investigate into these claims.

Looking ahead tomorrow sees the release of the RBA rate decision, US trade balance, Services PMI, ISM Non-Manf, composite, API crude oil inventories, New Zealand employment rate, World Daily Trade Auction, comments from Fed's Kocherlakota (Non-Voter, Dove), RBA press conference, ECB's Noyer (Soft Dove) and BoC Deputy Governor Wilkins.