Concerns about the US economy encouraged a risk-off trading environment and pushed the US dollar higher against its “riskier” counterparts.
Meanwhile, crude oil continued its downward trends, spot gold pulled back from highs at $2,350, and Fed bets on lower interest rates sent US bond yields lower.
Titles:
- Switzerland CPI for May: 1.4% y/y (expect 1.6% y/y; 1.4% y/y previously); Monthly growth rate maintained at 0.3% per month versus 0.4% per month expected
- The French government's budget deficit widened by €91.6 billion in the January-April period, compared to €83.71 billion in the same period last year.
- The number of unemployed people in Spain decreased by 58.7 thousand in May, compared to a decrease of 60.5 thousand in April and expectations of a decrease of 55.4 thousand.
- The number of unemployed people in Germany rose by 25,000 in April, compared to an expected increase of 7,000, and an increase of 10,000 in March.
- US JOLTS job openings fell from 8.36 million to 8.06 million vs. 8.37 million expected in April
- US factory orders slowed from 0.8% m/m to 0.7% m/m as expected in April.
- The US RealClearMarkets/TIPP Economic Optimism Index fell from 41.8 to 40.5 (vs. 45.2 expected) in June as inflation concerns persist.
- New Zealand Foreign Trade Index: 5.1% QoQ (vs. 3.1% expected, -7.8% in Q4 2023) as the value of exports (6.6%) exceeded the value of imports (-1.2%)
- Japan's average cash income rose 2.1% year-on-year in April, the fastest in 10 months. The decline in real wages slowed from -2.5% y/y to -0.7% y/y
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Major financial assets were all over the place as traders waited for more US data to provide clues about Friday's labor market data.
See, a disappointing manufacturing PMI from the US has raised growth concerns that appear to overshadow optimism over expected interest rate cuts from the European Central Bank and the Federal Reserve.
Spot gold retested weekly highs near $2,350 before retreating back to the $2,315 area, crude oil extended its weekly decline and revisited levels below $73.00 while US 10-year bond yields fell to the 4.33% area.
Forex market behavior: US dollar against major currencies
Overlay of the US dollar against major currencies Chart by TradingView
The US Dollar Index traded in the red at one point during the Asian session, which coincides with the US Dollar losing pips against its safe-haven counterparts such as the Japanese Yen and Swiss Franc, even as risk aversion pushed it higher against its “riskier” counterparts.
It didn't help for the USD/JPY pair that markets were betting on the Bank of Japan (BOJ) discussing a slowdown in its bond purchases as early as next week. This could push Japanese yields (and JPY demand) higher!
The US session saw US JOLTS vacancy figures beat estimates in April and received cuts to their reading in March. Although it is a lagging indicator, it has raised concerns about the health of the economy and weakened the US dollar further against other safe havens and erased some of its gains against other peers.
Potential catalysts coming on the economic calendar:
- French industrial production at 6:45 am GMT
- Services PMI in Spain at 7:15 AM GMT
- Services PMI in Italy at 7:45 AM GMT
- Final Services PMI in France at 7:50 AM GMT
- Final Services PMI in Germany at 8:00 AM GMT
- The final UK Services PMI will be announced at 8:30 AM GMT
- Eurozone producer price indices at 9:00 AM GMT
- US ADP report at 12:15 pm GMT
- The Bank of Canada will issue its policy decision at 1:45 PM GMT, which will be released at 2:30 PM GMT.
- Final PMI for US services at 1:45pm GMT
- US Services PMI at 2:00 PM GMT
- US crude oil inventories at 2:30 pm GMT
US Dollar traders are gearing up for another busy day, as the final S&P Global Services PMI and ISM Services PMI may provide further clues to the US NFP report on Friday.
The Bank of Canada (BOC) is also expected to cut interest rates by 25 basis points later today, so you better keep a close eye on your CAD settings!
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