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Dollar traders must be feeling the jitters ahead of the NFP release as they refrained from taking huge bets on the currency, leaving the yen to take its share of risk-off flows.

Sterling carried on with its tumble from the previous trading session, bogged down by a less hawkish BOE statement and Inflation Report.

  • U.S. initial jobless claims down from 245K to 240K vs. 242K forecast
  • ISM non-manu PMI down from 57.4 to 53.9 vs. 56.9 consensus
  • U.S. final services PMI upgraded from 54.2 to 54.7
  • U.S. Challenger job cuts down 37.6% y/y vs. previous 19.3% drop
  • U.S. factory orders recovered by 3.0% vs. expected 2.9% gain

Major Events/Reports

Mixed U.S. data

Uncle Sam’s reports churned out mixed results again, but leading jobs indicators hinted of a slowdown in hiring for July.

The ISM non-manufacturing PMI slipped from 57.4 to 53.9 to reflect a slower pace of industry growth compared to the projected fall to 56.9. Underlying data showed that the decline was spurred by lower business activity and production, a drop in new orders, and weaker supplier deliveries. The employment component dropped from 55.8 to 53.6 as well.

The Challenger job cuts report showed a 37.6% year-over-year reduction, larger than the previous 19.3% fall. This marked the lowest monthly reduction in payrolls since November last year while seeing more job opportunities announced in the same month. Components of the report indicated that majority of the job losses are coming from the retail sector but that other industries like tech are making up for it with stronger hiring prospects.

Initial jobless claims eased from 245K the other week to 240K, better than the consensus at 243K. U.S. factory orders recovered by 3.0% from the earlier 0.3% dip, outpacing the projected 2.9% gain on stronger aircraft demand.

Risk-off vibes return?

It must be the pre-NFP jitters or the fresh wave of uncertainty triggered by special investigator Mueller’s creation of a grand jury for the Russian intelligence leak probe. Either way, U.S. equity indices closed mostly in the red despite seeing another batch of upbeat earnings data.

  • The S&P 500 index closed 5.41 points down to 2,472.16 (-0.22%)
  • The Nasdaq closed 22.30 points down to 6,340.34 (-0.35%)
  • The Dow 30 index was up 9.86 points to 22,026.10 (+0.04%)

News reports are suggesting that the grand jury could look into evidence of Russian interference in the 2016 elections, undermining confidence in the Trump leadership once more. U.S. bond yields also tumbled during the session:

  • U.S. 10-year bond yield fell 1.88% to 2.219%
  • U.S. 30-year bond yield dropped 1.82% to 2.796%
  • U.S. 5-year bond yield is down 0.03% to 1.790%

Major Market Mover(s):

GBP

Sterling continued to slide against its counterparts as New York session traders reacted to the implications of the BOE’s less upbeat statement.

GBP/USD edged to a low of 1.3108 before recovering slightly, GBP/JPY is down to 144.45, EUR/GBP popped up to .9040 before consolidating, and GBP/AUD is down to the 1.6500 area.

JPY

The yen was the only consistent gainer for the day as it took advantage of risk aversion and dollar weakness.

USD/JPY dropped from 110.36 to 109.88, EUR/JPY is down to the 130.50 minor psychological support, AUD/JPY fell from 87.62 to 87.46, and CAD/JPY slipped to 87.50.

Watch Out For:

  • 1:00 am GMT: Japanese average cash earnings y/y (0.5% expected, 0.6% previous)
  • 2:30 am GMT: RBA monetary policy statement
  • 2:30 am GMT: Australian retail sales m/m (0.2% expected, 0.6% previous)