The USD ended the day mixed, with modest declines against the Euro and Kiwi, mild gains against the Yen, Cable and Chf and pretty much unchanged elsewhere. The Euro was underpinned by reports that some ECB policy makers are unhappy with the fact that the next EU rate hike has not been priced in until December 2019. The headline saw a delayed reaction, sending the Euro above 1.1700 in early European trade, since when it has chopped around nearby.
Stocks ended higher, with the US indices up by around 0.75%, while commodities were mixed. WTI had another volatile session, down by 1%, while the metals ended pretty much unchanged.
In terms of data, the ADP report showed 177k growth in private non-farm jobs, below expectation of 180k although the prior month’s figure was revised up from 178k to 189k. The initial jobless claims rose 3k to 231k in the week ended June 30, higher than expectation of 221k, while the continuing claims rose 32k to 1.74m in the week ended June 23. The US non-manufacturing ISM was firmer than expected at 59.1 (est. 58.2) with non-factory business activity reaching 63.9 – the highest since 2005. Later in the afternoon, the FOMC Minutes from the June meeting confirmed that the Fed will continue to hike rates although there are ongoing risks to the economy from trade concerns. All things being equal, the Fed expect to reach a neutral policy in 2019.
Friday gets off to a fairly quiet start with regards to data although the US trade tariffs are set to come into force at 2pm Sydney time today so we could see a fair bit of volatility in the Asian afternoon, depending on the headlines coming out of Washington/Beijing. Data-wise, Asia will contend with just the Australian AIG Performance of Construction Index and the Japan Leading Economic Index, while Europe will also be thin, with just the German Industrial Production for May to provide any inspiration (exp 0.3%mm). Things will warm up once the US get going though, with the US Jobs/NFP/Average Hourly Earnings (exp 3.8%, 190K, 0.3%) all due for release, while traders will be also looking for some kind of clarity as to what is going on with the US/China tariffs. If there is no resolution to the spat and both sides follow through on their threats to each other, this could provoke some risk-off sentiment ahead of the weekend close, which could potentially send US stocks lower along with the commodity currencies, and with fresh demand a possibility for the Yen and Chf. Have a good weekend.
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