Today is another NFP Friday, so trading conditions were naturally tight as forex traders sat on their hands ahead of the U.S. NFP report. It wasn’t a complete snooze fest, though, since the pound was slumping hard across the board, thanks to poor U.K. data.
- Swiss jobless rate: steady at 3.2% as expected
- German industrial production m/m: 1.2% vs. 0.2% expected, 0.7% previous
- French industrial production m/m: 1.9% vs. 0.5% expected, -0.6% previous
- Swiss foreign currency reserves: CHF 693B vs. CHF 694B previous
- U.K. Halifax HPI m/m: -1.0% vs. 0.2% expected, 0.3% previous
- Italian retail sales m/m: -0.1% vs. 0.3% expected, -0.4% previous
- U.K. industrial production m/m: -0.1% vs. 0.4% expected, 0.2% previous
- U.K. manufacturing production m/m: -0.2% vs. 0.5% expected, 0.2% previous
- Goods trade balance in the U.K.: -£11.9B vs. -£10.8B expected, £01.6B previous
Today is another NFP Friday! As such, both directional movement and volatility were in short supply on most pairs, as forex traders hunkered down ahead of the U.S. NFP report.
By the way, if you’re planning to trade the upcoming June NFP report and need to get up to speed on what happened last time and what’s expected this time, then you may wanna take read up on Forex Gump’s Event Preview for the NFP Report. You can read it here.
And while you’re at it, you may also want to read up on Forex Gump’s Event Preview for Canada’s June Jobs Report, since it would be released simultaneously with the U.S. NFP Report. You can read up on Forex Gump’s Canada Jobs Report Preview here.
Negative reports for the U.K.
The U.K. released a slew of economic reports earlier today. And unfortunately for the pound, they were all rather disappointing.
First, industrial production in the U.K. fell by 0.1% month-on-month in May. This is a rather severe disappointment because industrial production was expected to rise by 0.4% after the previous rise of 0.2%.
Digging deeper into the report, the slide in industrial output was due mainly to the 0.8% drop in energy production and the the 0.2% contraction in manufacturing production.
The contraction in manufacturing output, in particular, is rather disappointing because manufacturing was expected propel total industrial output with a 0.5% rise.
Industrial production accounts for around 14% to 15% of the U.K.’s GDP. And unless the industrial production comes in at 1.2% month-on-month or better come June, then industrial production will likely be a drag on GDP growth.
Moreover, industrial production slide further by 0.2% year-on-year, marking the second month of declines for the annual reading. Obviously, this does not bode well for annual Q2 GDP growth.
Moving on, the U.K.’s trade gap widened from £2.116 billion to £3.073 billion in May, thanks to the U.K.’s goods trade deficit widening from £10.595 billion to £11.863 billion, as imports grew at a faster pace than imports (+0.9% vs. +2.7% imports).
Commodities resume slide
Yesterday’s commodities rally had no legs to stand on its seems, since commodities were broadly in the red again during today’s morning London session.
Precious metals were in negative territory, despite the risk-off vibes.
- Gold was down by 0.08% to $1,222.35 per troy ounce
- Silver was down by 0.78% to $15.859 per troy ounce
Base metals were mostly down.
- Copper was down by 0.36% to $2.652 per pound
- Zinc was down by 0.08% to $2,779.50 per dry metric ton
Oil benchmarks got hit extra hard.
- U.S. WTI crude oil was down by 2.61% to $44.33 per barrel
- Brent crude oil was down by 2.58% to $46.87 per barrel
The Greenback was actually mixed (and mostly flat) during the morning London session.
However, the Greenback did harvest some gains during the Asian session. And so the U.S. dollar index was up by 0.22% to 95.79 for the day when the morning London session ended. And that likely induced commodity shorts to come in.
Other than that, market analysts pointed mainly to profit-taking ahead of the NFP report and after yesterday’s commodities rally.
As to why oil plunged pretty hard, market analysts pinned the blame on that on data showing that U.S. oil output recovered after slipping last week, as well as OPEC oil exports reaching a 2017 high, which reignited concern over the oil glut.
Downbeat vibes to end the week
Risk aversion persisted, so European equity indices are currently on course to close both the day and the week on a lower note.
- The pan-European FTSEurofirst 300 was down by 0.38% to 1,490.52
- Germany’s DAX was down by 0.26% to 12,349.00
- The blue-chip Euro Stoxx 50 was down by 0.24% to 3,451.50
Aside from the usual skittishness ahead of the NFP report, market analysts blamed the gloomy mood mainly on the slump in oil prices, which weighed down on energy shares and soured overall risk sentiment.
Major Market Mover(s):
Most currency pairs were range-bound ahead of the NFP report, but pound pairs were clearly an exception since they all plunged lower when the U.K.’s disappointing economic reports came out.
GBP/USD was down by 89 pips (-0.52%) to 1.6970, GBP/JPY was down by 65 pips (-0.44%) to 146.72, GBP/NZD was down by 75 pips (-0.42%) to 1.7715
Watch Out For:
- 12:30 pm GMT: U.S. non-farm payrolls (175K expected, 138K previous), jobless rate (steady at 4.3% previous), average hourly earnings (0.3% expected, 0.2% previous)
- 12:30 pm GMT: Canadian employment change (11.3K expected, 54.5K previous) and jobless rate (steady at 6.6% expected)
- 2:00 pm GMT: Ivey’s Canadian PMI (57.7 expected, 53.8 previous)
- 3:00 pm GMT: U.S. Fed monetary policy report will be released