The major assets traded in tight ranges until the U.S. session when a bunch of data releases fired up market volatility.
Can you guess which headlines were under the spotlight on Wednesday?
We have a list:
Headlines:
- Euro Area’s final services PMI revised higher from 52.6 to 52.8 in June (52.6 forecast)
- U.K.’s final services PMI jumped from 51.2 to 52.1 in the final reading for June (51.2 forecast)
- Euro Area PPI for May: -0.2% m/m (-0.1% expected, -1.0% previous)
- U.S.-based employers announced 48,786 cuts in June, down 23.6% from May but 19.8% higher compared to June 2023 – Challenger Report
- U.S. ADP report for June: 150K (163K expected, 157K previous); Annual pay rose by 4.9% – the slowest since August 2021
- U.S. initial jobless claims for the week ending June 29: 238K (234K expected and previous)
- Canada’s trade deficit widened from 1.3B CAD to 1.9B CAD in May as exports (-2.6%) fell faster than imports (-1.6%)
- U.S. final services PMI adjusted higher from 55.1 to 55.3 in June (vs. 55.0 expected); “The rate of job creation was solid and the sharpest since May 2023”; Price increases were solid but softer than in May
- U.S. ISM services PMI dropped sharply from 53.8 to 48.8 (52.6 expected) in June; Prices slipped from 58.1 to 56.3; Employment down from 47.1 to 46.1
- U.S. factory orders surprisingly dropped by 0.5% m/m in May (0.2% expected, 0.4% previous)
- EIA: U.S. crude oil inventories decreased by 12.2M barrels in the week ending June 28 (-0.4M expected, +3.6M previous)
- Fed’s June meeting minutes showed the members’ preference to wait for “additional favorable data” before lowering its target range
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
As we’ve seen over the past few days, major assets traded within pretty tight ranges during the Asian session.
In early European trading, services PMI reports from the Euro Area and the U.K. didn’t make much of a splash as traders braced for the big U.S. data releases.
When Uncle Sam dropped a bunch of top-tier data, the markets zeroed in on the labor market reports which hinted at a potentially weak non-farm payrolls report coming this Friday.
A weaker labor market could push the Fed to cut rates sooner rather than later. This likely explains why the 10-year U.S. Treasury yields slid to 4.34%, U.S. stocks hit new highs, and the dollar traded broadly lower.
Spot gold, a popular dollar alternative, shot up throughout the day, hitting highs near $2,365 before settling at $2,350. Meanwhile, WTI crude oil bounced from its $82.45 lows, getting a boost from a lower-than-expected EIA crude oil inventories report.
Bitcoin (BTC/USD) was an exception as it extended its July downtrend to trade below $60,000. Word around is that some bitcoin HODLers may be taking profits ahead of the bankrupt Tokyo-based bitcoin exchange Mt. Gox paying back almost $9 billion worth of tokens to thousands of users.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
Like other major assets, the U.S. dollar traded in ranges until the start of the European session when a bit of profit-taking ahead of top-tier U.S. data releases likely dragged the currency lower.
A weaker-than-expected ADP report in the early U.S. session accelerated the dollar’s downswings. The report missed market estimates AND reflected slower pay growth for both job changers and job stayers!
The plot thickened shortly after when ISM’s closely watched services PMI not only missed expectations but unexpectedly contracted in June. Details also showed that components such as Prices and Employment weakened from the previous month.
Luckily for USD bulls, the dollar recouped most of its post-ISM PMI losses. Whether it’s prepping for the FOMC meeting minutes or profit-taking ahead of the July 4th holiday, USD capped the day higher than its intraday lows.
Upcoming Potential Catalysts on the Economic Calendar:
- U.S. markets out on bank holiday
- U.K.’s parliamentary election results due
- Switzerland’s unemployment rate at 5:45 am GMT
- Germany’s factory orders at 6:00 am GMT
- Switzerland’s June CPI at 6:00 am GMT
- U.K.’s construction PMI at 8:30 am GMT
- ECB’s meeting minutes at 11:30 am GMT
- Japan’s household spending at 11:30 pm GMT
The U.S. markets are out on a bank holiday today but that doesn’t mean we won’t see fireworks in our charts!
In a few hours, we’ll get the first results of the U.K.’s parliamentary elections. Any deviation from a clear win for the Labour Party may cause spikes for the major Sterling pairs so make sure you’re glued to your tubes for relevant headlines!
While waiting for the results, keep your eyes peeled for Switzerland’s June inflation release and the ECB’s meeting minutes. The releases may shed light on the ECB and SNB’s policy biases and future policy decisions and can affect EUR and CHF’s intraday prices.
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