Concerns about the U.S. economy encouraged a risk averse trading environment and pushed the U.S. dollar higher against its “riskier” counterparts.
Meanwhile, crude oil extended its downtrends, spot gold pulled back from its $2,350 highs, and interest rate cut bets for the Fed dragged U.S. bond yields lower.
Headlines:
- Switzerland CPI for May: 1.4% y/y (1.6% y/y forecast; 1.4% y/y previous); monthly growth rate held at 0.3% m/m vs. 0.4% m/m forecast
- France’s government budget deficit widened 91.6B EUR in the January to April period, up from 83.71B EUR in the same period last year
- The number of unemployed in Spain dropped by 58.7K in May vs. 60.5K drop in April and 55.4K decline expected
- The number of unemployed in Germany rose by 25K in April vs. 7K increase expected, 10K uptick in March
- U.S. JOLTS job openings dipped from 8.36M to 8.06M vs. 8.37M expected in April
- U.S. factory orders slowed from 0.8% m/m to 0.7% m/m as expected in April
- U.S. RealClearMarkets/TIPP Economic Optimism Index dropped from 41.8 to 40.5 (vs. 45.2 expected) in June as inflation concerns persist
- New Zealand’s overseas trade index: 5.1% q/q (vs. 3.1% forecast, -7.8% in Q4 2023) as the value of exports (6.6%) outpaced the value of imports (-1.2%)
- Japan’s average cash earnings grew by 2.1% y/y in April, the fastest in 10 months; The decline in real wages decelerated from -2.5% y/y to -0.7% y/y
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major financial assets were everywhere as traders waited for more U.S. data to provide clues for Friday’s labor market releases.
See, a disappointing manufacturing PMI from the U.S. brought on growth concerns that seem to overshadow the optimism over expected rate cuts from the European Central Bank (ECB) and the Fed.
Spot gold retested its weekly highs near $2,350 before falling back down to the $2,315 area and crude oil extended its weekly downswing and revisited levels below $73.00 while U.S. 10-year bond yields dropped to the 4.33% zone.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar index traded in the red sometime during the Asian session, which coincides with USD losing pips against safe haven counterparts like JPY and CHF even as risk aversion pushed it higher against its “riskier” counterparts.
It didn’t help USD/JPY that the markets bet on the Bank of Japan (BOJ) discussing the slowdown of its bond purchases as early as next week. That may push Japanese yields (and JPY demand) higher!
The U.S. session saw the U.S. JOLTS job openings missing estimates in April and getting downgrades for its March reading. While it’s a lagging indicator, it fueled concerns for the economy’s health and weakened USD further against other safe havens and knocked some of its gains against the other counterparts.
Upcoming Potential Catalysts on the Economic Calendar:
- France’s industrial production at 6:45 am GMT
- Spain’s services PMI at 7:15 am GMT
- Italy’s services PMI at 7:45 am GMT
- France’s final services PMI at 7:50 am GMT
- Germany’s final services PMI at 8:00 am GMT
- U.K.’s final services PMI at 8:30 am GMT
- Euro Area PPIs at 9:00 am GMT
- U.S. ADP report at 12:15 pm GMT
- BOC’s policy decision at 1:45 pm GMT, presser at 2:30 pm GMT
- U.S. final services PMI at 1:45 pm GMT
- U.S. ISM services PMI at 2:00 pm GMT
- U.S. crude oil inventories at 2:30 pm GMT
USD traders are in for another busy day as the S&P Global final services PMI and ISM’s services PMI may provide more clues for Friday’s U.S. NFP report.
Bank of Canada (BOC) is also expected to cut its interest rates by 25 basis points later today, so y’all better keep close tabs on your CAD setups!
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