The US dollar lost significant ground against the euro in today’s forex action while it was also under pressure against the yen as sentiment towards the greenback turned negative ahead of Friday’s employment numbers.
In Europe, German factory orders for May grew by 1% month-on-month, while analysts had been expecting a 2% increase. During April, factory orders had fallen by 2.2%. In the monetary policy meeting accounts of the European Central Bank, there was a discussion whether the pledge to accelerate the bank’s bond buying should be dropped in order to reflect an improving economic background. However, inflation was still weak and this called for stable policy.
Euro/dollar briefly crossed above the 1.14 level to make a high for the day at 1.1401 and continued to hover slightly below that level at 1.1395 at the time of writing despite a beat in the ISM non-manufacturing PMI.
It was a relatively busy day for US economic releases. Starting with the ADP private sector payroll numbers for June, they came in at 158 thousand; a little off from the 185K expected by analysts and down from the previous month’s downwardly revised figure of 230K. Initial weekly jobless claims were also a little negative as they climbed slightly to 248K from 244K the previous week. The nation’s trade balance was more or less in line with expectations with a deficit of 46.50 billion dollars during May. The respective deficit during April was 47.6 billion.
The day’s most important economic news came with the release of the ISM non-manufacturing index for June. The index rose to 57.4 compared with 56.9 in May. Analysts had forecast a print of 56.5. While the new orders component climbed sharply to 60.5, the employment sub-index fell a couple of points to 55.8. Prices paid also rose to 52.1 form 49.2, which could have some implications for services inflation going forward.
Against the yen the dollar was in a narrow range as an effort to break above 113.46 failed after stock markets turned south and some risk aversion set in. Dollar/yen was last at 113.20.
In commodities, gold was holding around $1223 an ounce whereas oil extended its rebound from the previous day’s deep losses to $46.33. In today’s crude oil inventory report, there was a significantly larger-than-expected draw of 6.29 million barrels. Analysts were expecting only a 2.28 million barrels draw and this substantial encouraged further gains for oil prices
Looking ahead, Friday’s agenda will be dominated by June’s employment report in the United States. Nonfarm payrolls are expected to come in at 179 thousand, the unemployment rate to hold at 4.3% and average hourly earnings to rise by 0.3%. Following that number, during the weekend, traders could follow the G20 summit in Germany for clues about the economic policy of the world’s major economies. Geopolitics are also an issue to watch after this week’s North Korean missile test.
