US Economy not Performing as Advertised

This was supposed to be the year the US economy led a strong recovery but as the data rolls in the growth isn't materializing. On Wednesday, the yen was the best performer while the Aussie lagged to the lowest since 2011 ahead of trade numbers. 2 new trades on AUDJPY alongside weekly and monthly stochastics charts were issued in the Latest Premium Insights.

US economic indicators continue to point to growth around 2%, not the near-3% level Bernanke wants before tapering QE. The latest was ADP employment at 135K compared to 165K expected. The private jobs report hasn't touched above 200K this year.

The ISM non-manufacturing main index was at 53.7, which was slightly above the 53.5 expected but the details were mixed. New orders were at the highest since February but employment was at 50.1, the lowest since July and pointing to a soft non-farm payrolls report on Friday.

Even the Fed seemed to acknowledge slower growth in the Beige Book as the overall growth assessment was slightly downgraded to 'modest to moderate' from 'moderate'.

The US stock market was unimpressed with the data, falling 1.4% to 1608. In the FX market, the initial reaction was to sell the dollar across the board but those moves quickly retraced, especially against the commodity currencies.

The Australian dollar rose above 0.9600 on the ADP report then sank as low as 0.9512, breaking last week's low.

The lone indicator on the docket is at 0130 GMT with April Australian trade balance. The RBA has lamented soft exports so this could be a downside surprise. The consensus is for a A$180 million surplus. Be wary of the market overreacting to this number because it came from a month where the high AUD would have had a detrimental effect. It will be interesting to see the June numbers to see if activity begins to pick up thanks to the 7% AUD drop.