It was a bullish and adverse day for the US dollar, as it erased intraday gains while traders braced for a potential loss in non-farm payrolls.
The ECB's monetary policy decision also took the spotlight when it surprised the central bank with a “tight easing” and spurred rapid gains for the common currency.
Titles:
- New Zealand commodity prices in May: 1.1% m/m (previously 0.5%)
- Australian goods trade surplus in April: A$6.55 billion (A$5.37 billion expected, A$4.84 billion previously) with exports down 2.5% and imports down 7.2%
- The Swiss unemployment rate rose from 2.3% to 2.4% in May, versus expectations for no change
- German Factory Orders in April: -0.2% m/m (+0.6% expected, -0.4% previous)
- UK construction PMI in May: 54.7 (52.5 expected, previous 53.0)
- US Challenger Job Cuts in May: -20.3% YoY (-3.3% previously)
- The European Central Bank cut interest rates by 25 basis points as expected, and Lagarde declined to provide forward guidance while updating growth and inflation forecasts for 2024 and 2025.
- US Initial Jobless Claims: 229K (220K expected, previous 221K)
- US labor costs for Q1 2024 fell from 4.7% QoQ initially reported to 4.0%
- Canada Ivey PMI for May: 52.0 (65.2 expected, 63.0 previously) hits 10-month low as inventories and deliveries decline while employment and inflation remain high
- Japanese household spending in April: 0.5% y/y (0.6% forecast, -1.2% previously) for first gain in 14 months
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Market correlations appear to still be in flux, as was the case the previous day, with crude oil and spot gold advancing alongside US bond yields early.
On the flip side, the dollar got off to a weak start, although risk sentiment was shaken during the Asian trading session as traders prepared for upcoming top-tier events.
Volatility rose at the start of the London session, as crude oil briefly erased previous gains and then recovered just as quickly. From there, the energy commodity quickly rose to new intraday highs and closed roughly 2% higher. Gold also saw a significant rebound during the US session as it closed approximately 1% higher on the day.
Forex market behavior: US dollar against major currencies
Overlay of the US dollar against major currencies Chart by TradingView
This has been one of those volatile days for the dollar, starting weak while falling across the board during the early Asian session.
The safe haven currency quickly bottomed and staged a uniform rally at the beginning of market hours in London. The franc strengthened, forcing the USD/CHF pair to break away from the rest of its dollar counterparts to end up weaker at 0.41% on the day.
The ECB's decision also led to increased volatility and some gains for the common currency when the central bank eased policy in what many saw as a “tight easing” announcement.
Dollar pairs had a steady downward trajectory for the rest of the US trading session, with market participants likely taking a position ahead of what could be a major success. An NFP may be issued.
Potential catalysts coming on the economic calendar:
- China's trade balance at 3:00 am GMT
- German industrial production at 6:00 am GMT
- Swiss National Bank foreign exchange reserves at 7:00 am GMT
- Canadian employment report at 12:30 AM GMT
- US Nonfarm Payrolls report at 12:03 AM GMT
We have two major market catalysts expected during the New York trading session, which are the May jobs numbers from the US and Canada.
Of the two, the US Non-Farm Payrolls report may come out on top, as dollar traders are keen to reprice expectations on future Fed policy actions. Make sure to check out our website May NFP Events Guide Let's see what the leading indicators suggest and how the USD pairs could react!
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