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Today is another NFP Friday. And normally, trading conditions tighten ahead of the NFP report. Today wasn’t a very normal day, though, since the euro and the pound were both in demand.

The Kiwi, meanwhile, was the biggest loser of the session, even though risk-taking was the name of the game in Europe.

  • Spanish manufacturing PMI: 53.4 vs. 53.9 expected, 54.4 previous
  • Swiss manufacturing PMI: 62.4 vs. 62.3 expected, 63.6 previous
  • Italian manufacturing PMI: 52.7 vs. 53.0 expected, 53.5 previous=
  • French final manufacturing PMI: 54.4 vs. no change from 55.1 expected
  • German final manufacturing PMI: 56.9 vs. no change from 56.8 expected
  • Euro Zone final manufacturing PMI: unchanged at 55.5 as expected
  • U.K. manufacturing PMI: 54.4 vs. 53.5 expected, 53.9 previous
  • U.S. NFP report coming up

Major Events/Reports:

NFP Friday!

Today is another U.S. non-farm payrolls (NFP) Friday! And normally, volatility and directional movement are both in short supply as traders hunker down ahead of the NFP report.

But as mentioned earlier, today was apparently not a normal day since the euro, the pound, and the Kiwi were on the move.

Anyhow, if you’re planning to trade the NFP report, then you may wanna check out Forex Gump’s Event Preview for the upcoming NFP report.

Trump tweets

Does Trump know some thing about the upcoming NFP report that we don’t?

U.K. manufacturing PMI

Markit released the U.K.’s manufacturing PMI report for the May period earlier.

And fortunately (for GBP bulls), the report revealed that the U.K.’s headline manufacturing PMI reading improved from 53.9 to 54.4, contrary to expectations that the PMI reading would deteriorate further to 53.5.

The improved reading was driven mainly by manufacturing output increasing at the fastest rate “during the year-so-far” and the first increase in input prices since January.

Other indicators weren’t too upbeat, though, since evidence pointed to “the steepest build-up of finished goods inventories in the 26-year survey history.”

Also, “Employment rose only marginally, with the pace of increase the lowest in 15 months.”

And while input prices did rise, British manufacturers didn’t seem to pass on their higher costs since “the rate of selling price inflation eased to its weakest since last August.”

Rajoy booted from office

The no-confidence vote against Mariano Rajoy apparently prospered and Rajoy found himself booted out of office. This is the first time that a Spanish Prime Minister got removed from office via a no-confidence vote.

And Pedro Sanchez, the head of Spain’s opposition socialist PSOE party, will replace Rajoy as the new Spanish Prime Minister.

Rajoy was forced to face a no-confidence vote after several members of Rajoy’s People’s Party were convicted of corruption.

As for Sanchez, he’s actually the one who called for the no-confidence vote in the first place. And while the no-confidence vote does remove some uncertainty since Sanchez is pro-EU, Sanchez’s rise is also a potential source of uncertainty since Sanchez’s PSOE Party only has 84 seats (out of 350) in Parliament.

Risk-friendly ahead of NFP

Markets usually become skittish ahead of the NFP report. Today wasn’t a usual day, though, since the major European equity indices were mostly well in the green.

And according to market analysts, the risk-frienly environment in Europe was due to relief and renewed optimism after the 5-Star Movement and League managed to hammer out a new deal to form a coalition government in Italy and news that Italian President Mattarella has agreed to endorse the new ministers presented.

  • The pan-European FTSEurofirst 300 was up by 1.03% to 1,514.02
  • Germany’s DAX was up by 0.96% to 12,725.61
  • The blue-chip Euro Stoxx 50 was up by 1.22% to 3,456.35

U.S. equity futures were in positive territory. Although the NFP report may change that later.

  • S&P 500 futures were up by 0.46% to 2,718.00
  • Nasdaq futures were up by 0.35% to 7,001.25

Major Market Mover(s):

GBP

The pound was the best-performing currency of the morning London session. And while the better-than-expected PMI reading did help to push the pound higher, we can’t really attribute the pound’s strength solely to the PMI report since the pound began climbing a few hours before the PMI report was released. No clear reason why, though.

GBP/USD was up by 45 pips (+0.35%) to 1.3323, GBP/NZD was up by 124 pips (+0.66%) to 1.9099, GBP/AUD was up by 92 pips (+0.52%) to 1.7680

EUR

The euro was the second strongest currency of the session, very likely because of renewed hopes for a coalition government in Italy and relief after Sanchez succeeded Rajoy as the Spanish PM.

EUR/USD was up by 33 pips (+0.29%) to 1.1709, EUR/JPY was up by 41 pips (+0.32%) to 127.75, EUR/NZD was up by 59 pips (+0.35%) to 1.6761

NZD

The Kiwi was the weakest currency of the session, despite the risk-friendly vibes in Europe. And yes, it was weaker than the safe-haven yen.

There was no apparent catalyst for the Kiwi’s weakness. However, it’s possible that market players were ditching the Kiwi in favor of other assets, namely European equities.

Another possibility is start-of-month positioning and/or portfolio rebalancing by the big players. Profit-taking by Kiwi bulls is also a possibility. After all, the Kiwi did have a good run this week.

NZD/USD was down by 23 pips (-0.33%) to 0.6973, NZD/CHF was down by 31 pips (-0.46%) to 0.6888, NZD/CAD was down by 16 pips (-0.17%) to 0.9048

Watch Out For:

  • 12:30 pm GMT: U.S. non-farm payrolls (+190K expected vs. +164K previous), jobless rate (steady at 3.9% expected), and average hourly earnings (0.2% expected vs. 0.1% previous); read Forex Gump’s Event Preview
  • 1:30 pm GMT: Markit’s Canadian manufacturing PMI (55.5 previous)
  • 1:45 pm GMT: Markit’s final U.S. manufacturing PMI (no change from 56.6 expected)
  • 2:00 pm GMT: ISM’s manufacturing PMI (58.3 expecte vs. 57.3 previous)
  • 2:00 pm GMT: U.S. construction spending (0.8% expected, -1.7% previous)