Dollar pairs were all over the place during the New York session as the U.S. currency got a small boost from the FOMC minutes but returned to earlier levels just as quickly.
Economic data from the U.S. turned out mixed as well, and positioning ahead of the NFP release today and the tariffs deadline on China kept most majors on edge.
- U.S. ADP non-farm employment change at 177K vs. 190K forecast
- U.S. initial jobless claims at 231K vs. 225K consensus, 228K previous
- U.S. ISM non-manufacturing PMI rose from 58.6 to 59.1 in June
- U.S. EIA crude oil inventories up by 1.2M barrels vs. expected 4.4M drop
- FOMC minutes: Some officials thought running economy too hot risks downturn
- FOMC: Downside risks from trade war, emerging markets and Europe
- FOMC: Trade uncertainties led to scaled back capital spending, business sentiment
- FOMC: Forward guidance no longer appropriate in light of recent economic strength and rate path
Mixed U.S. data
The latest batch of economic reports from Uncle Sam turned out mixed, barely giving any strong clues on how the highly-anticipated June NFP release might turn out.
First off, the June ADP non-farm employment change figure came in weaker than expected at 177K versus expectations of a 190K increase. This was also lower than the earlier gain, which was upgraded from 178K to 189K.
However, the ISM non-manufacturing PMI, which is also considered a good leading indicator for the NFP, beat expectations by climbing from 58.6 to 59.1 instead of dipping to 58.3.
Looking at the components, though, shows that the pickup in business activity and new orders drove the gains while the jobs sub-index actually fell from 54.1 to 53.6. Meanwhile, the component for prices also fell from 64.3 to 60.7 to signal weaker inflationary pressures down the line.
Lastly, the initial jobless claims figure also turned out weaker than expected at 231K versus the projected 225K drop in unemployment. This is also worse than the earlier 228K increase in joblessness.
FOMC minutes highlight trade risks
The transcript of the latest FOMC huddle revealed that most policymakers agreed on the current path of interest rates but remained wary of fresh risks from trade tensions.
Members of the committee expressed support for gradual interest rate hikes, with some even warning that letting the economy run too hot might risk a downturn. They also noted that fiscal policy changes have been supportive of growth.
On more somber note, policymakers also threw the spotlight on worsening tensions between the U.S. and its trade allies. Many cited that their business contacts reported lower capital spending due to these uncertainties. Other sources of downside risks included emerging markets and Europe.
When it came to inflation, FOMC members acknowledged that the recent price moves keep it on track towards achieving the 2% goal. Some said that allowing inflation to hover around that level could help anchor longer-term expectations. However, one committee member suggested that delaying a hike could help push these inflation expectations higher. Three guesses who!
Major Market Mover(s):
Surprisingly, the Kiwi was the top-performer of the session despite worries ahead of the tariffs deadline on China. Then again, a bit of risk appetite was evident in the performance of U.S. equities for the day.
NZD/USD advanced from .6782 to .6803, NZD/JPY climbed from 75.09 to 75.24, EUR/NZD inched down to the 1.7200 handle, AUD/NZD retreated to 1.0875, and GBP/NZD is down to 1.9449.
Watch Out For:
- 12:00 am GMT: Japanese average cash earnings y/y (0.9% expected, 0.6% previous)
- 5:00 am GMT: Japanese leading indicators (improvement from 106.2% to 106.5% expected)