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Today is another NFP Friday so trading conditions were relatively tight and price action was rather choppy, likely because forex traders were keeping their heads down because of the upcoming NFP report.

With that said, there were some weak themes, namely Greenback weakness, as well as soft demand for the higher-yielding Aussie and Kiwi, despite the skittish risk sentiment in Europe.

  • German industrial production m/m: 2.6% vs. 0.3% expected, -1.3% previous
  • French trade balance: -€6.0B vs. -€5.1B expected, -€5.2B previous
  • Swiss foreign currency reserves: CHF 749B vs. CHF 741B previous
  • Halifax U.K. HPI m/m: 0.3% vs. 0.2% expected, 1.7% previous
  • Italian retail sales m/m: 0.8% vs. 0.4% expected, -0.6% previous
  • U.S. NFP report coming up
  • Canada’s jobs report also on tap

Major Events/Reports:

NFP Friday!

Today is another U.S. non-farm payrolls (NFP) Friday! And under normal circumstances, volatility and directional movement are usually in short supply as traders sit on their hands ahead of the NFP report.

Well, today was certainly a very normal day since most currency pairs were milling about in tight ranges, with many closing flat for the session.

By the way, 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.

Also, do note that Canada will be releasing its jobs report simultaneously with the NFP report. So while you’re at it, you may also wanna check out Forex Gump’s Event Preview for Canada’s jobs report.

China returns fire as trade war begins

Chinese Foreign Ministry Spokesperson Lu Kang had a presser earlier during the session, and he was asked about China’s response to U.S. tariffs coming into effect.

And according to Lu Kang:

“[T]he Customs Tariff Commission of the State Council, the Commerce Ministry and the General Administration of Customs have issued the information that, upon the US’ unilateral and unfair imposition of additional tariffs on China came into effect, China’s tariff increase on some of American exports would also take effect immediately.”

In other words, China’s tariffs took effect almost immediately after U.S. tariffs took effect, which means that the Sino-US trade war has officially begun. Whoop-dee-doo!

Skittish sentiment in Europe

The major European equity indices intially took cues from the earlier Asian session’s risk-on vibes since they edged up, even though the U.S. and China both fired the opening salvo in a trade war.

And according to some market analysts, that’s because the market has already priced-in a trade war and some of its negative effects.

Anyhow, it soon became clear that risk aversion was making a comeback as the session progressed, since the major European equity indices began to come off their intraday highs and most were already in the red by the end of the session.

There’s no clear reason for the returning risk-off vibes, but they may just be due to the usual skittishness ahead of the NFP report. Although some market analysts also pointed to trade-related jitters.

  • The pan-European FTSEurofirst 300 was down by 0.07% to 1,494.03
  • Germany’s DAX was down by 0.02% to 12,461.25
  • The blue-chip Euro Stoxx 50 was down by 0.10% to 3,437.65

U.S. equity markets also got weighed down by the risk-off vibes in Europe, forcing them to erase earlier gains.

  • S&P 500 futures were down by 0.16% to 2,734.25
  • Nasdaq futures were down by 0.17% to 7,113.50

Major Market Mover(s):

USD

The Greenback was the weakest currency of the morning London session. There were no direct catalysts, but it’s possible that we’re just seeing some preemptive positioning and/or profit-taking ahead of the NFP report.

However, it’s also possible that the Greenback was weighed down because of the trade war with China since the Greenback did appear to encounter more sellers when Lu Kang announced that China has fired back.

USD/JPY was down by 10 pips (-0.09%) to 110.64, USD/CHF was down by 5 pips (-0.05%) to 0.9926, USD/CAD was down by 2 pips (-0.02%) to 1.3129

GBP

The pound was the second weakest currency of the session, thanks to a quick bout of selling at around 9:00 am GMT.

There was no clear reason for the selling pressure, but it’s possible that some GBP bulls were unwinding their positions ahead of British PM Theresa May’s Brexit Cabinet meeting for later.

GBP/USD was up by 2 pips (+0.02%) to 1.3229, GBP/AUD was down by 10 pips (-0.06%) to 1.7845, GBP/NZD was down by 24 pips (-0.13%) to 1.9392

AUD & NZD

For what it’s worth (given the small gains), the Kiwi and the Aussie were able to extend their gains from the earlier session, with the Kiwi in first place and the Aussie in second place during the morning London session.

Demand for the two higher-yielding currencies made sense at first when risk-taking initially prevailed. But as mentioned earlier, risk sentiment later turned sour (and commodities sank to boot), but the two comdolls just kept on soldiering on, which is rather wonky. It’s probable, however, that the two comdolls were just feeding off the Greenback’s broad-based weakness.

AUD/USD was up by 5 pips (+0.06%) to 0.7412, AUD/CHF was up by 3 pips (+0.04%) to 0.7359, AUD/JPY was up by 5 pips (+0.06%) to 81.99

NZD/USD was up by 11 pips (+0.16%) to 0.6821, NZD/CHF was up by 7 pips (+0.10%) to 0.6770, NZD/JPY was up by 8 pips (+0.11%) to 75.45

Watch Out For:

  • 12:30 pm GMT: U.S. non-farm employment (+195K expected vs. +223K previous), jobless rate (steady at 3.8% expected), and average hourly earnings (0.3% expected, same as previous); read Forex Gump’s Event Preview for the June NFP report
  • 12:30 pm GMT: U.S. trade balance (-$43.7B expected vs. -$46.2 B previous)
  • 12:30 pm GMT: Canada’s net employment change (+17.5K to +24.0K expected vs. -7.5K previous) and jobless rate (expected to hold steady at 5.8%); read Forex Gump’s Event Preview for Canada’s jobs report
  • 12:30 pm GMT: Canada’s trade balance (-$2.0B expected vs. -$1.9B previous)
  • 2:00 pm GMT: Canada’s Ivey PMI (63.2 expected vs. 62.5 previous)