The Australian dollar erased most of its recent forex gains when both trade balance and retail sales came in weaker than expected. The trade deficit widened from a downgraded 0.78 billion AUD deficit in April to a 1.91 billion AUD shortfall in May, worse than the estimated 0.16 billion AUD deficit. Retail sales slumped by 0.5% instead of staying flat while the previous figure was downgraded from a 0.2% increase to a 0.1% decline. There are no reports due from New Zealand while Canada has its trade balance due.
The US dollar found its legs in yesterday’s forex trading session when US data came in mostly in line with expectations. The factory orders report showed a 0.5% dip while crude oil inventories showed a 3.2 million barrel shortfall. The ADP non-farm employment change report printed a better than expected 281K increase versus the estimated 207K figure and the previous 179K reading. For today, the non-farm payrolls report is up for release and it might show a drop from 217K in May to 214K in June, just enough to keep the jobless rate steady at 6.3%.
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The euro gave back some of its recent forex gains to the dollar as the Spanish unemployment change report showed a smaller than expected 122.7K pickup in hiring versus the estimated 147.3K figure. However, this is still an improvement from the previous 111.9K reading. For today, Spanish and Italian services PMI are up for release, but the bigger market mover is the ECB rate statement. No actual policy changes are expected but market watchers will keep tabs on Draghi’s press statement, as this might give clues on next policy moves.
The pound extended its gains in recent forex trading when construction PMI also came in stronger than expected, following the previous day’s better than expected manufacturing PMI release. The construction index climbed from 60.0 to 62.6 instead of dipping to the projected 59.7 figure. For today, the services PMI is up for release and might also show a strong reading instead of dipping from 58.6 to 51.6 as analysts expect.
The yen made a bit of recovery when risk aversion peeked back in the forex markets, but it still gave ground to the US dollar. There have been no reports released from Japan yesterday and none are due today, which suggests that risk sentiment could be the main driver of price action among yen pairs.
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