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The headline was a much better than expected ADP non-farm employment change print, which raised expectations ahead of the non-farm payrolls print. The reading showed 188,000 jobs were created versus estimates of around 161,000. Unemployment claims were only slightly better than expected while the US ISM services PMI and trade balance disappointed.
While US equities pushed higher, the US dollar actually struggled a bit and lost ground to most major currencies apart from the AUD. AUD/USD dropped to a low of 0.9037 and continues to struggle as the swaps market prices in a higher probability of an August rate cut following Governor Glen Stevens comments. The pair recovered to a high of 0.9119 early in Asia but has since come under pressure again following a disappointing building approvals reading. Building approvals showed a 1.1% contraction, wider than the expected 0.9% contraction. We also have RBA Deputy Governor Lowe on the wires soon. Although Lowe’s speech is mainly on regulation, it’ll be interesting to see if he goes through his speech without mention of the currency. Selling into strength is likely to be the preferred strategy.
USD/JPY has dropped back below 100 and is currently sidelined at around 99.88 following BoJ Gov Haruhiko Kuroda’s speech. US markets are closed later today for the July 4th holiday so leads will be relatively light on the USD side.
EUR/USD continues to hover around 1.30 with a cautious tone heading into the ECB decision. While the region is facing Portugal and Greece concerns again, we feel the chance of anything too substantial is low. Data has improved of late, though we don’t see a sizeable reaction to talk down the currency until the pair trades up to the 1.35 area.
GBP/USD is also sidelined at around 1.526 ahead of the BoE. The pair jumped significantly yesterday on the back of a better-than-expected services PMI reading. Not much is expected from the BoE later today, particularly with the economy there ticking along just fine. It’ll be interesting to hear what tone Mark Carney sounds at his first meeting at the helm.