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This Thursday’s European Central Bank meeting will be the main event risk in the FX market this week.

A slightly underwhelming US nonfarm payrolls report halted the dollar rebound in its tracks late-last week.

Currency traders remained in a rather cautious mood on Wednesday, failing to commit to sizable positions in either direction ahead of Friday’s US payrolls report.

A rebound in commodity prices sent emerging market currencies higher last week as investors favoured high risk assets at the expense of the safe-havens.

Vaccination progress has been one of the most important determinants of exchange rates so far in 2021. We do, however, think that with the reopening of economies, vaccination numbers will be less relevant in the eyes of investors. Attention now turns to the performance of the G3 economies and the response of central banks to both the rebound in economic activity and the sharp increase in global inflationary pressures.

One of the key moves among asset classes during 2021 thus far has been the sharp increase in commodity prices. We outline below how commodities have evolved so far this year, what factors have driven the move higher and the impact that we think it may have on the FX market in the coming months.

The New Zealand dollar soared on Wednesday after the RBNZ suggested that it could start raising interest rates in 2022.

EUR/USD rose to near its strongest position so far in 2021 on Tuesday amid strong European economic data and dovish comments from an FOMC member.

In a week with few moves of note, a hawkish turn by central banks in Eastern Europe stole the spotlight. The G3 PMIs also posted strong rebounds, boding well for the global economic recovery.

UK retail sales jumped sharply higher in April, although currency traders largely overlooked the data.