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Focus for 1 - 5 May 2017: Fed rate statement and US nonfarm payroll report

Gold and euro prices rose on Friday as robust euro zone inflation data sent the euro higher against the U.S. dollar, but the precious metal still ended the week lower while the dollar pushed higher against the yen as solid U.S. wage data offset figures showing that economic growth slowed in the first three months of 2017.

Gold for June delivery settled at $1,269.65 on the Comex division of the New York Mercantile Exchange. EUR/USD was up 0.21% to 1.0896 late Friday, not far from the five-and-a-half month highs set earlier in the week.

The annual rate of inflation in the euro area rose by 1.9% in April, Eurostat said, the highest level in over three years. Core inflation rose by a stronger-than-forecast 1.2% year-on-year, the highest level since September 2013. The upbeat data fueled expectations that the European Central Bank could adopt a more hawkish stance at its next policy meeting in June.

USD/JPY was up 0.23% at 111.52 after the Department of Labor reported that the employment cost index, the broadest measure of labor costs, increased 0.8% in the first quarter, the largest increase since the fourth quarter of 2007. The data offset another report showing that the U.S. economy posted its slowest growth in three yearsin the three months to March, with gross domestic product growing at a 0.7% annual rate. The slowdown was due in large part to a near-stagnation in consumer spending, which grew by just 0.3%.

Sterling ended the week at seven-month highs against the dollar, with GBP/USD up 0.38% at 1.2951 in late trade. The pound shrugged off data pointing to a showdown in UK growth at the start of the year as higher inflation, which has risen sharply since the Brexit vote, eroded consumer spending. UK GDP grew by just 0.3% in the first quarter, down from 0.7% in the three months to December. Demand for sterling continued to be underpinned in the run-up to the election called by Prime Minister Theresa May, who says she wants to strengthen her hand ahead of Brexit negotiations.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid to 98.89 late Friday.

In the week ahead from 1 - 5 May 2017, markets will be paying close attention to Friday’s U.S. nonfarm payrolls report as well as Wednesday’s policy statement by the Federal Reserve. The euro zone is to release data on first quarter growth and the UK is to publish survey data that will further show the economic impact of last year’s Brexit vote.

Fi24h Editorial Board
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