- May US ISM services 49.9 vs 52.0 expected
- ADP May employment +37K vs +110K prior
- Bank of Canada rate decision: Rates held at 2.75% as expected
- More talk about a near-term Canada-US trade deal
- Beige Book: Economic activity has declined slightly since the prior report
- BOC Governor Macklem: We will be watching carefully the next two CPI reports
- EIA weekly US oil inventories -4304K vs -1035K expected
- Trump: Just spoke with Putin for 1 hour, 15 mins
- Kremlin confirms that Russia’s response to Ukraine drone attacks was discussed
- Putin says he doubts the possibility of a ceasefire with Ukraine given latest attacks
- US April S&P Global final services PMI 53.7 vs 52.3 prelim
- Canada May S&P Global services PMI 45.6 vs 41.5 prior
- Canada Q1 labor productivity +0.2% vs +0.6% prior
Markets:
- Gold up $21 to $3372
- US 10-year yields down 10 bps to 4.36%
- WTI crude oil down 59-cents to $62.82
- S&P 500 flat
- JPY leads, USD lags
Trade took a rare backseat to economic data today. Unfortunately, the data was concerning on the US side as both the ADP jobs report and ISM services report missed estimates. In addition, the Beige Book talked about a slowing economy.
With that, the US dollar was steadily sold and USD/JPY erased virtually all of yesterday’s moves with similar swings elsewhere. Trump himself cited the ADP report in a tweet and renewed calls for Powell to cut rates. Yields fell in a sign the bond market is concerned about US economic strength, despite the poor recent track records of the ADP and ISM data sets.
The 115 pip decline in USD/JPY nearly wiped out yesterday’s gain and the dollar was soft elsewhere. It did bounce slightly late in the day but I expect talk to drift back towards rate cuts and angst will build ahead of Friday’s non-farm payrolls report.
USD/CAD fell to the lowest since October as the Bank of Canada held rates steady. A cut was priced at 26% so today’s move wasn’t completely priced in and that was reflected in some moderate CAD buying that sent the pair through last week’s extremes. The loonie was held back by softer oil prices on a report that Saudi Arabia wants to continued adding barrels.
Cable reached as high as 1.3579 before backing off by a quarter-cent late. The euro touched 1.1434 and did a better job of holding onto gains. Tomorrow is the ECB decision and no move is expected but Lagarde will be pressed into commenting on the rate path in light of lower inflation. That said, I expect more ‘wait and see’ rhetoric as everyone tries to figure out what Trump will do.
This article was written by Adam Button at www.forexlive.com.
