U.S. Session Forex Recap – July 7, 2016

  • Canadian trade deficit widened to 3.3 billion CAD in May
  • Canada’s exports down 0.7%, imports down 0.8%
  • U.S. trade deficit grew to 41.1 billion USD in May
  • U.S. ISM non-manufacturing PMI jumped from 52.9 to 56.5
  • FOMC minutes: Policymakers worried about weak payrolls
  • Fed back in neutral mode even before EU referendum

What’s up with that dollar selloff?! The Greenback and the yen gave back their recent gains as risk appetite appeared to improve.

Major Events:

Canadian trade balance – Canada printed a weaker than expected trade balance for May, indicating a shortfall of 3.3 billion CAD versus the estimated 2.6 billion CAD deficit. To top it off, the previous reading was revised to show a larger deficit of 3.3 billion CAD from the initially reported 2.9 billion CAD deficit.

Components of the May report indicated that exports were down 0.7% and imports were down 0.8% during the month. Trade volumes were lower, reflecting weaker internal and external demand, but higher prices somehow made up for those declines. On a positive note, exports of energy products showed a strong 7.1% rebound in May mostly due to the strong surge in crude oil prices then. Imports of energy products marked their third consecutive monthly gain as well.

Mixed U.S. data – Uncle Sam’s economic reports came in mixed, with the trade balance falling short of expectations and the ISM non-manufacturing PMI printing impressive results. The U.S. trade deficit widened from $37.4 billion to $41.1 billion, worse than the projected $40 billion shortfall. Components of the report showed that both imports and exports declined from the previous month.

Meanwhile, the June ISM non-manufacturing PMI jumped from 52.9 to 56.5, outpacing the consensus at 53.3 and showing a much faster pace of industry expansion. The index for employment landed back above 50.0 from previously indicating contraction while indices for new orders and business production showed strong gains as well.

FOMC minutes – As expected, the release of the FOMC minutes didn’t cause too much of a ruckus since market watchers knew that this meeting took place prior to the Brexit vote. Still, the transcript suggested that policymakers had already shifted to a neutral stance even before the EU referendum took place, mostly because of labor market jitters following the downbeat May NFP release.

With that, Fed officials agreed that it would be best to wait for more jobs data before deciding on an interest rate hike. Policymakers also highlighted risks stemming from a Brexit and the high debt levels in China, warning that these factors could spur global market turbulence.

Major Currency Movers:

USD & JPY – After ending the previous day on such a strong note against their counterparts, the dollar and the yen wound up returning most of these gains.

USD/JPY retreated from the 100.25 area to a high of 101.47, EUR/JPY bounced back to a high of 112.55, GBP/JPY edged slightly above the 130.00 mark, and AUD/JPY is back above 76.00. EUR/USD climbed from a low of 1.1030 to a high of 1.1123, GBP/USD is consolidating around 1.2925, and AUD/USD carried on with its intraday climb to .7520.

Watch Out For:

  • 12:30 am GMT: Australia AIG construction index
  • 1:30 am GMT: BOJ Governor Kuroda’s testimony

See also:

Asian Session Recap

London Session Recap

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