FX market participants now await Friday’s NFP report that will show the number of jobs created by the US economy in June. Yesterday's June ADP print came in stronger than expected. For this reason, investors expect a robust jobs report, although there is no correlation between the two data points.
The market is abuzz with rumors that the latest round of pandemic-induced lockdowns is heating up expectations ahead of the NFP report, putting dollar speculators on high alert. If the report disappoints, the dollar will retreat sharply until the next payrolls report.
The single currency also came under pressure from Wednesday’s Eurozone inflation report. The reading flagged a mild decline in inflation across the bloc in June. According to Eurostat’s flash estimate, the CPI rose 1.9% YoY in June, after increasing 2.0% in May. The ECB forecasts inflation below, but close to, 2.0%.
Today’s macro agenda (GMT 3)
- From 10:55 to 11:30 manufacturing PMIs for June are due out of France, Germany, the Eurozone, and the UK
- 11:00 UK: BoE Governor Andrew Bailey speech
- 12:00 Eurozone: employment market report (May)
- 15:30 US: initial jobless claims
- 16:45 US: Markit manufacturing PMI (June)
- 17:00 US: ISM manufacturing PMI (June) and construction spending (May)
- 14:00: OPEC JMMC meeting, 16:30: Monitoring Committee meeting, 18:00 OPEC meeting
Current outlook
Major currencies slipped into negative territory during Asian trading. The steepest losses were seen in the Aussie dollar (-0.26%). The euro retraced to a monthly low of 1.1837.
In June, the euro declined 3.01% against the dollar, and rose 1.08% in Q2, leaving a long upper shadow of 3.46%. The situation deteriorated markedly near the end of the month as the dollar rallied with gold amid falling UST yields.
Major currencies are in retreat, while gold is on the rise. The main reason behind the upward move in XAUUSD is positive US macro data, with ADP and pending sales trending higher. The housing market is attracting buyers on the back of lower mortgage rates, which fell below 3%, and also due to an uptick in listings.
Major currencies might catch up with gold, or else gold will plunge to $1,757 vs. $1,778 in Asian trading. On the daily euro TF, the bears are set to make a push lower to 1.1775 (trendline). It is no easy matter to gauge investor sentiment at this point due to the pandemic and uncertainty over the Fed’s future course of policy action. There is also a fair amount of buying, but the bulls are being swept off the market as a result of negativity.
On Thursday, the EU is to release PMI data. BoE Governor Andrew Bailey might have something interesting to say today. Also watch for weekly unemployment data and the ISM manufacturing PMI. We expect the market lull to continue through today’s session and it’s hard to say whether or not the euro will attempt to muster a recovery amid the current news flow.