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Weak Wall Street performance and downbeat leading jobs indicators combined forces to drag the Greenback lower against its counterparts. European currencies carried on with their rallies fueled by hawkish central bank biases.

  • U.S. Challenger job cuts down 19.3% y/y in June
  • U.S. June ADP non-farm employment change at 158K vs. 184K
  • U.S. May ADP non-farm employment change downgraded to 230K
  • U.S. ISM non-manu PMI up from 56.9 to 57.4 vs. 56.5 forecast
  • Canadian trade deficit widened from 0.6B CAD to 1.1B CAD vs. 0.5B CAD forecast
  • Canada’s building permits jumped by 8.9% vs. expected 2.5% gain
  • U.S. trade deficit narrowed from $47.6B to $46.5B vs. $46.3B forecast
  • U.S. initial jobless claims at 248K vs. 243K consensus, 244K previous
  • U.S. final services PMI up from 53.0 to 54.2 in June
  • U.S. crude oil inventories fell by 6.3M barrels vs. expected 2.4M reduction

Major Events/Reports

Mostly downbeat U.S. jobs data

Forex junkies have been keeping extra close tabs on U.S. jobs releases lately to glean some clues on how the upcoming NFP report might turn out. While the ISM manufacturing PMI released earlier this week hinted at an upside surprise, the rest of the leading indicators gave mixed signals.

For one, the ADP non-farm employment change reading fell short of estimates as it printed a 158K increase in hiring versus the estimated 184K gain for June. To make things worse, the May reading was downgraded from 253K to 230K, signaling that negative revisions could be seen for the previous NFP figures.

Although the ISM non-manufacturing PMI beat expectations with a climb from 56.9 to 57.4 versus the consensus at 56.5 to reflect a stronger pace of industry growth, the jobs component slipped from 57.8 to 55.8. Now this is considered a more accurate preview of the official jobs report compared to the manufacturing PMI because the services sector accounts for a larger part of the U.S. labor market.

On a less downbeat note, the Challenger job cuts report showed a 19.3% reduction in layoffs for June. This represents an improvement over the earlier 9.7% increase in job cuts.

If you wanna get a more detailed breakdown of the U.S. jobs figures or if you’re planning on trading the NFP report, I highly suggest you check out my buddy Forex Gump’s June NFP Preview.

Crude oil rebound

Black Crack continued its climb from earlier sessions thanks to better than expected inventory data from the Energy Information Administration.

Oversupply concerns were eased when the report indicated a draw of 6.3 million barrels, much larger than the projected reduction of 2.4 million barrels. To top it off, this was also better than the decline of 5.764 million barrels reported by the American Petroleum Institute earlier in the week.

WTI crude oil popped up to $46.30 per barrel upon seeing the numbers then retreated to $45.26 per barrel. Brent crude oil is up to $47.97 per barrel.

One factor that may have forced the commodity to return some of its intraday gains was the escalating tension between the Gulf states and Qatar. As it turns out, Saudi Arabia has announced new measures against the country for “continuing to seek to sabotage and undermine the security and stability in the Gulf region.”

Qatar has previously stated that it will do “whatever it takes to protect our people” after Saudi and its allies cut diplomatic ties and imposed a land, air, and sea embargo. Many worry that retaliation could come in the form of higher oil output to revive global oversupply concerns yet again.

Tech sector slump, North Korea weigh on stocks

A bit of risk aversion was still present during the U.S. trading hours as market watchers seemed uneasy about the North Korea situation.

U.S. President Trump pledged to confront North Korea “very strongly” after its latest ICBM launch test showed potential for hitting the U.S. mainland in terms of range. The Donald went on to say that the government is looking into “severe things” for North Korea and that “something will have to be done.”

Apart from these geopolitical risks, another slump in the tech sector dragged U.S. equity indices lower for the day:

  • Dow 30 index closed 158.13 points lower (-0.74%)
  • S&P 500 index ended at 2,409.75 (-0.94%)
  • Nasdaq is down to 6,089.46 (-1.00%)

Mixed data from Canada

Traders are also paying close attention to economic reports from Canada as the BOC is gearing up to make its policy statement next week. With hawkish remarks coming from a few of its policymakers recently, the pressure is on for the Canadian economy to print numbers that back it up.

However, the latest reports turned out mixed as building permits churned out a higher than expected 8.9% gain versus the projected 2.5% increase while the trade balance was a disappointment. The deficit widened from 0.6 billion CAD to 1.1 billion CAD versus the projected shortfall of 0.5 billion CAD.

This marked the fourth consecutive miss in trade figures, signaling that Canada might not be out of the woods just yet. Underlying components revealed that the larger deficit was spurred by a 2.4% increase in imports outpacing the 1.3% gain in exports. Shipments of energy products were 9% lower for the month, but this has been attributed to seasonal factors.

Major Market Mover(s):

USD

The scrilla weakened across the board when traders got wind of downbeat leading jobs indicators, which tempered positive NFP expectations.

USD/JPY fell from 113.44 to 113.14, EUR/USD advanced from 1.1366 to 1.1423, GBP/USD is up from a low of 1.2925 to a high of 1.2977, and USD/CHF fell to the .9600 handle.

Watch Out For:

  • 12:30 am GMT: Australia’s AIG construction index (56.7 previous)
  • 12:30 am GMT: FOMC member Fischer’s testimony
  • 1:00 am GMT: Japanese average cash earnings y/y (0.4% expected, 0.5% previous)
  • 6:00 am GMT: Japanese leading indicators (104.6% expected, 104.2% previous)