Today’s European session was a rather quiet one in terms of data, with forex market participants focusing on the number of jobs added by the US private sector in the preceding month, July construction PMI numbers for the UK and June eurozone producer prices. The dollar remained close to the multi-month lows from previous sessions.
In the US, the ADP report showed private employers adding 178,000 positions in the economy during July. This negatively compares to expectations for 185,000 additions, though a positive aspect of the report was the upward revision for June – 191,000 positions from the 158,000 that was previously reported. Dollar/yen rose within the first few minutes of the data release, though not by much. The eagerly-awaited non-farm payrolls report, which accounts for both public and private sector employment, will be released on Friday.
The dollar’s index against a basket of major currencies was last 0.2% down on the day and marginally below the 93 handle. Earlier in the day, it fell extremely close to yesterday’s 15-month low of 92.78. Meanwhile, dollar/yen was 0.1% up on the day, trading around just below 110.50.
On the political front, renewed talks of a trade dispute between the US and China also gathered attention today, with US President Donald Trump being reportedly close to a decision on how to react to what he perceives unfair trade practices on behalf of the world’s second largest economy.
Back to today’s economic releases, the UK Markit/CIPS construction PMI for the month of July was released at 51.9, significantly below expectations for a reading of 54.5 and the previous month’s 54.8. July’s figure constitutes an 11-month low and came on the back of a grimmer economic outlook and rising political uncertainty ahead of Brexit negotiations. Manufacturing PMI numbers were released yesterday at an upside surprise, while the respective figures for the services sector will be released tomorrow. Construction makes up 6% of the UK economic pie.
Sterling fell to as low as $1.3223 upon immediate release of the data from $1.3240 before the news, though it recovered soon after on those losses. Pound/dollar rose to a fresh 10½-month high of 1.3244 in today’s trading – it last traded 0.2% up on the day. Relative to the euro, sterling was weaker on the day during late European trading hours with euro/pound trading at 0.8957. The Bank of England will be completing its two-day meeting tomorrow and is expected to maintain its benchmark rate at the record low of 0.25%. The British currency is expected to post gains should BoE Governor Mark Carney signal a more hawkish tone relative to the past.
Turning to eurozone-related releases, June producer prices contracted by 0.1% month-on-month as expected, while the previous month’s rate was upwardly revised to -0.3% from -0.4% before. On an annual basis, prices rose by 2.5%, their slowest during the year. This was slightly above analysts’ forecasts of 2.4%, but below May’s 3.4% (the result of an upward revision from 3.3%). Euro/dollar was on a downward path a little before the data went public and extended losses following the release of the numbers. Still the pair last traded up on the day, while it hit a fresh 31-month high of 1.1868 earlier in the day.
The oil-linked Canadian dollar was hurt by yesterday’s report by the American Petroleum Institute which showed crude stockpiles rising despite expectations for a fall. Today’s Energy Information Administration’s (EIA) report on US crude oil inventories added to pressure on the local dollar with dolar/loonie rising to the near two-week high of 1.2588 hit earlier in the today and attempting a move further above.
In commodities, gold initially fell on profit taking and on the rising risk appetite spurred by the bullish US stock market run. It later recovered though, last trading slightly up on the day $1270.22 an ounce, not far from the one-and-a-half-month high of $1273.96 that was recorded yesterday. The EIA weekly report showed oil inventories falling, albeit much less than expected and the previous week’s drawdown. As a result, oil prices edged lower. WTI and Brent crude were last trading at $48.92 and $51.59 barrel, down 0.5% and 0.4% on the day respectively.
Cleveland and San Francisco Fed Presidents John Williams and Loretta Mester are scheduled to speak at 16:00 and 19:30 GMT respectively. They’re both non-voting FOMC members.
