It was a rally and reverse kind of day for the U.S. dollar, as it unwound its intraday gains while traders braced for a potential NFP miss.
The ECB monetary policy decision also took the spotlight when the central bank surprised with a “hawkish cut” and spurred quick gains for the shared currency.
Headlines:
- New Zealand’s ANZ commodity prices in May: 1.1% m/m (0.5% previous)
- Australia’s goods trade surplus in April: 6.55B AUD (5.37B AUD expected, 4.84B AUD previous) as exports fell 2.5% and imports tumbled 7.2%
- Swiss unemployment rate ticked higher from 2.3% to 2.4% in May vs. expectations of no change
- German factory orders in April: -0.2% m/m (+0.6% forecast, -0.4% previous)
- U.K. construction PMI in May: 54.7 (52.5 forecast, 53.0 previous)
- U.S. Challenger job cuts in May: -20.3% y/y (-3.3% previous)
- ECB lowered interest rates by 25 basis points as expected, Lagarde refrained from giving forward guidance as growth and inflation forecasts for 2024 and 2025 upgraded
- U.S. initial jobless claims: 229K (220K forecast, 221K previous)
- U.S. labor costs for Q1 2024 downgraded from initially reported 4.7% q/q to 4.0%
- Canadian Ivey PMI for May: 52.0 (65.2 forecast, 63.0 previous) reaching its 10-month low as inventories and deliveries tumbled while employment and inflation stayed elevated
- Japanese household spending in April: 0.5% y/y (0.6% forecast, -1.2% previous) to mark its first gain in 14 months
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Market correlations still seemed to be in flux, as in the previous day, as crude oil and spot gold advanced along with U.S. bond yields early on.
On the flip side, the dollar was off to a weak start, despite shaky risk sentiment during the Asian trading session while traders were bracing for upcoming top-tier events.
Volatility picked up at the start of the London session, as crude oil briefly erased its earlier gains then recovered just as swiftly. From there, the energy commodity soon surged to fresh intraday highs and closed nearly 2% higher. Gold also had quite the rebound during the U.S. session as it closed almost 1% up for the day.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
It was one of those topsy-turvy days for the Greenback, as it started off on weak footing while tumbling across the board during the early Asian session.
The safe-haven currency soon bottomed out and staged a uniform rally right around the start of the London market hours. Franc strength came in play, forcing USD/CHF to diverge from the rest of the dollar peers and eventually end up weakest at 0.41% lower for the day.
The ECB decision also spurred additional volatility and a few gains for the shared currency when the central bank eased policy in what many deemed was a “hawkish cut” announcement.
Dollar pairs had a steady downward trajectory for the rest of the U.S. trading session, as market players likely positioned ahead of what might be a blockbuster May NFP release.
Upcoming Potential Catalysts on the Economic Calendar:
- Chinese trade balance at 3:00 am GMT
- German industrial production at 6:00 am GMT
- SNB foreign currency reserves at 7:00 am GMT
- Canada’s employment report at 12:30 am GMT
- U.S. non-farm payrolls report at 12:03 am GMT
We’ve got a couple of major market catalysts lined up for the New York trading session, namely the May jobs figures from the U.S. and Canada.
Between the two, the U.S. non-farm payrolls report might be front and center, as dollar traders are keen to reprice expectations for future Fed policy action. Make sure you check out our Event Guide for the May NFP to see what leading indicators are suggesting and how USD pairs might react!
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