US Dollar Coming Up Short
As is almost always the case during NFP week, all the action happened on Friday. NFPâ�,��"�s missed. Badly. The 170K figure was constantly revised downward to as little as 110K by some banks in the Street, but even dollar bears worst estimates were too high as the number printed at 75K and sent the EUR/USD above the 1.2900 figure in a matter of seconds.  

The rest of the data was of little help to dollar longs as ISM Manufacturing dropped to 54.4 from 55.8 projected while Productivity, Pending Homes Sales and Factory Orders all missed their mark. Chicago Fedâ�,��"�s Moskow, who is not a voting member this year was on the wires Friday saying that inflation is up since March and â�,��"Fedâ�,��"�s expectations are on the lineâ�,�, but no one paid heed.  The sentiment shifted dramatically towards the pause scenario. In fact, if the Fed were to hike in June, it is not necessarily a given that the market would view the move as dollar positive, as many players may view this as more of an act of desperation rather than one of strength.

Next week the calendar remains essentially barren with only todayâ�,��"�s ISM Non-Manufacturing and Friday Trade Balance as releases of any consequence.  The only major positive for dollar bulls is the fact that positioning is in their favor and EUR longs reached records highs on IMM. Still, in one way markets such positioning can be right rather than wrong. Clearly, 1.3000 remains within reach.

Euro: 50 Basis Points or Bust?
A forest of green as far as the eye can see. Thatâ�,��"�s what the calendar looked like for the Euro-zone last week as almost every report of interest produced better than expected results. The regionâ�,��"�s economic engine is finally showing signs of sustained growth as Retail Sales rise while unemployment falls. In fact the news was so bullish last week that market now expects to see a 50 basis point rate hike at this Thursdayâ�,��"�s ECB policy meeting and anything less will now be seen as a disappointment.

The ECB announcement remains the marquee event for EUR/USD this week but Services PMI and Retail Sales will also be watched carefully for further evidence that Euro-zone economy is on a roll. However, the central question facing the market this week will be whether ECB officials decide that the inflationary pressures in the 12 member union have reached a point of such danger that they would risk further currency appreciation to contain their impact.  For now at least, the usual wails of protest from EZ finance ministers have been relatively muted as the general feeling amongst the business sector is that EZ companies can absorb the higher exchange rates. However, should the pair climb towards the 1.3300 figure expect the rhetoric to heat up.

Japanese Market Wants a Hike
Economic releases gave something of a mixed bag last week as the Bank of Japan tries to decide on its plan of attack.  Beyond the releases,Japan saw an unsuccessful bond auction specifically because the rate fell short of the 2% the public was hoping for.  Comments in the week prior from the BoJ detailed that they did not want get too far behind that curve and sparked expectations of a move away from the zero percent rate target in the very near future.  Policy makers, however, are still rather hesitant and the data is not reassuring enough to ensure a move.  Public sentiment seems to be calling for a rate rise based on the disappointment seen with low interest rates offered on the new bonds â�,�“ something that may help sway the BoJ to move sooner rather than waiting.

This week is somewhat lighter on releases with expectations predicting another mix of ups and downs in the indicators.  Thursdayâ�,��"�s release of the Eco Watcherâ�,��"�s Survey for May could give traders some insight into what the BoJ has planned.  The survey is expected to come in higher than April at 55.0, indicating a positive sentiment on the economy amongst consumers and businesses alike.  With strong confidence going forward, the BoJ may be more comfortable tightening its monetary policy.

UK Numbers Disappoint
Yet again, the UK produced a depressing set of releases this week shedding less light on the darkening cloud over the British economy.  This week showed a slowing housing market, dampening consumer confidence, and a contraction in manufacturing.  Thursday, PMI manufacturing survey for May was released at 53.2, both weaker than April and weaker than expected.  Unfortunately for the pound, this coincided with a stronger than expected PMI release for the euro.  With the euro-zoneâ�,��"�s economy finally showing some spark, the EUR/GBP cross may suffer even more as the ECB looks to raise rates, closing up the interest rate differential which served as an advantage to the pound.  As the British economy continues to spit out these negative indicators, the BoE will have to at least keep rates as is at 4.50%, although they may be forced into a drop in the coming months, further exacerbating the contrast.

The upcoming week looks to be equally dreary.  Industrial and manufacturing production looked to have slowed while the trade balance deficit widening.  Although the BoE is expected to keep rates steady at its meeting this week, the recent and upcoming data should spur some questions as to how healthy the tighter monetary policy actually is for the struggling economy right now.

Swissie Regaled With Data
Despite a calendar relatively full of fundamental data, the Swiss franc was pulled along by a struggling US dollar.  Early in the week, the currency was able to gain back some lost strength, but this was all erased with the 200-pip dollar rally on Wednesday. The KOF leading indicator posted well above expectations and should have signaled to the markets that more positive data was poised to come from Switzerland.  However, the Swissie only was able to pick up its head momentarily while the dollar rallied.  Thursday was a heavy day of data for the currency, however the releases, albeit all positive, did not cause much of a stir.  CPI for May grew more than expected but far lower than in April, with the rise mostly driven by high oil prices and not a core price rise.  Simultaneously, first quarter GDP growth was also released stronger than expected.  Both releases indicate that the SNB could safely continue with its plan to again raise rates at its next meeting on June 15, however both were for the most part ignored possibly in anticipation of the following release of SVME purchasing managerâ�,��"�s index.  The survey for May showed another slowdown in the sector, although not one as large as expected, as high oil prices seem to be weighing on industries and the prior rate hike may be taking a toll.  This release finally jarred the markets and pulled the Swissie down about 90 pips.  Any strength lost Thursday was made up as the Swiss franc staged a 100-pip rally feeding off of weak US data.

After a week packed with important releases, the up-coming week has very little to offer by way of fundamental guidance.  With the sole release of the unemployment figure, which is shaping up to be positive news, the Swiss franc will have to look elsewhere for direction.  As the metals, specifically gold and copper, have fallen during the past weak and are seemingly less stable, traders could flow into the safer Swiss franc.  Next week, however, is shaping up to be another ride based on the successes and failures of the US dollar.

Boris Schlossberg is a Senior Currency Strategist at FXCM.