Signs of Life in the US Dollar
A strong ADP report breathed life into the US dollar but it also underscored the asymmetry of USD reactions to news that we wrote about yesterday. ADP employment shattered the 200K consensus with a 281K surge in June. The reaction was a 20-30 pip rally in the US dollar but most pairs were unable to hold the gains.
Contrast that to yesterday where the ISM manufacturing index missed expectations by six-tenths of a point and it resulted in substantially larger moves. One caveat today is that markets might have been shy to react with non-farm payrolls less than 24 hours away but it's discouraging for the US dollar bulls, especially when 10-year yields moved up 6.5 basis points.
The more general theme of the day was a pullback in AUD, CAD and GBP after multi-month/year highs yesterday. That's not a surprise given the gravity of non-farm payrolls.
The other major story on the day was oil. Libyan rebels struck a deal with the government to re-open two ports that handle about half of the nation's crude exports. Technically, crude fell back below the March/April highs that were broken with the trouble in Iraq flared.
Oil prices got a brief respite on bullish US inventory data but the bounce was quickly sold in another sign of the underlying tendency of the crude market.
The focus now shifts to the Australian dollar, which has been a big mover the past two days. Trade balance numbers curbed some of the recent enthusiasm but a speech from Stevens at 0000 and retail sales at 0030 GMT add fresh risks.The pullback Wednesday after the breakout is a somewhat standard reaction but the next move will prove whether it was a false breakout or something sustainable.
|Retail Sales (MAY) (m/m)|
|0.0%||0.2%||Jul 03 1:30|
|RBA's Governor Glenn Stevens Speech|
|Jul 03 1:00|
|Building Approvals (MAY) (m/m)|
|3.1%||-5.6%||Jul 03 1:30|
|Building Approvals (MAY) (y/y)|
|8.0%||1.1%||Jul 03 1:30|
|ADP Employment Change (JUN)|
|281K||200K||179K||Jul 02 12:15|
|Nonfarm Payrolls (JUN)|
|213K||217K||Jul 03 12:30|
|Trade Balance (MAY)|
|$-45.20B||$-47.24B||Jul 03 12:30|
|Trade Balance (MAY)|
|-1,911M||-780M||Jul 02 1:30|
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