London Session Recap
The US dollar was higher against the majors in London trading, remaining within the range for the week as traders await tomorrow's ECB rate decisions and US nonfarm payrolls report to bring resolution.
Eurozone May PPI came in above expected at 1.2% vs. prior 0.9% and this took the annual rate to the highest level on record, at 7.1% from 6.2% prior. ECB President Trichet offered some hawkish comments overnight, saying that “there's a risk of inflation exploding. If we act in a decisive way, we can master the situation.” While this clearly suggests the ECB's commitment to raise rates at tomorrow's confab, we will have to wait for Trichet's press conference to get any confirmation as to whether this will be a one and done event or the first in a series of tightenings. Despite this, EUR/USD was lower in the session, opening near the 1.5812 mark and closing around the 1.5782 level. Once again, with the US employment report and the ECB rate decision looming EUR/USD is having trouble staying above the 1.5800 area.
USD/JPY was bid as US stock futures were pointing to a positive open while yields traded higher in the session. The market is looking for the Dow to open roughly 50 pts higher, while 2-year and 10-year yields are 2 bps higher at 2.67% and 4.02%, respectively. USD/JPY opened the session near 105.95 and was sitting near the highs for the span around the 106.75 mark at the close.
Sterling was weaker against the greenback as well, with GBP/USD opening the session near 1.9950 and plunging to a close near the 1.9855 mark. Downbeat news for the UK housing market helped take GBP lower as PMI construction data for June came in at a much lower than expected 38.8 from 43.9 previous. Moreover, the UK's largest homebuilder suffered a sharp decline in its share price as it failed to raise capital from investors -- highlighting the lack of confidence in the UK housing market.
Upcoming Economic Data Releases (NY Session) Prior Estimate
- 7/2 12:15 US ADP Employment Change JUN 40K -20K
- 7/2 14:00 US Factory Orders MAY 1.10% 0.50%
- 7/2 15:00 US Paulson Speaks in London About Capital Markets
- 7/2 16:00 US Fed's Mishkin Speaks at Conference in Israel 2-Jul
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