Situation in the labor market in the USA is improving according to data published on Friday by the Labor Department. However, despite many hawkish comments, which recently emerged from the representatives of the Federal Reserve, the market does not read this as a prelude to the earlier increases in interest rates in the USA. The market sentiment in the equity and currency  markets will depend on the Ben Bernanke’s speech and the meeting of the European Central Bank.

Unemployment in the USA

In March, the unemployment rate unexpectedly fell in the U.S. to 8.8% from 8.9% a month earlier. It's not the first surprise from that report. The market was also positively surprised by the data on employment in non-agricultural sector. In March, it rose 216k, while the previous month, this increase amounted to 194k after correction. That's the highest job growth since May 2010. The market consensus was at 190k. Employment in the private sector rose in March by 230k, while the market expected growth rate of 200k.

Good data are another arguments for hawks. However, there are still few people believe that U.S. rates will soon rise. That is why the strengthening of the dollar in reaction to Friday's data was only temporary.

Bernanke’s speech

Today we will watch a speech by Federal Reserve Chairman Ben Bernanke. The markets is wondering whether he will strengthen hawks or not. Bernanke is not the only representative of the Federal Reserve, who will be to speak publicly this week. Heads of the Federal Reserve in Chicago, Atlanta, Philadelphia, Minneapolis and Richmond are also scheduled this week.

EURUSD between the ECB and Bernanke

The Bernanke’s speech might determine the EURUSD within the next few days. As we might have observed on Friday, the hawks in the U.S. and the lower rating for Ireland from S&P and for Portugal from Fitch, are not enough to strengthen the EURUSD permanently. If the Bernanke keeps on the current rhetoric and the ECB increases interest rates, the EURUSD will have a chance to break 1,4282 level (a maximum from November 2010). The new, more hawkish rhetoric will be a strong supply-side factor that may trigger a medium-term downward trend on the EURUSD.

Monday’s calendar

Monday’s calendar: Sentix Index in the Eurozone (10.30 CET, 4.30 ET), PPI in the Eurozone (11.00 CET, 5.00 ET). However, the current week will be rich in macroeconomics data. Apart from Bernanke’s speech and the ECB meeting, the Reserve Bank of Australia will decide about rates on Tuesday. On Thursday, similar decisions will take the Bank of Japan, Bank of England and European Central Bank. Equally important event will be Tuesday's publication of the minutes of the last FOMC meeting, and published on Wednesday the data on CPI inflation in Switzerland and industrial production in the UK.        

Pawel Kordala

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