USD weaker as markets prepare for today’s Non-Farm Payrolls report (expecting 153K) and June’s Unemployment Rate expecting 3.6%. Private businesses only hired 102K in June and the ISM non-Manufacturing Index dropped to 55.1 points (factory orders also dropped by 0.7% in May). President Trump scheduled a telephone conversation with China for next week to resume trade negotiations. China said they will not engage in competitive currency devaluation. Since the world’s two biggest economies agreed to a trade truce after the G-20 summit, USD is lower. In addition, the Federal Reserve has indicated a rate cut is possible this month to put further pressure on USD. The jobless rate for June is expected to remain at a 49-year low and annual wage gains at 3.2%.
Canadian dollar highlights:
CAD stronger due to higher oil prices and better than expected trade balance ($762 Million CAD surplus compared to forecast of $1.70 million CAD deficit). Crude oil inventories declined by 1.1 million (compared to -2.8 million forecast) due to increased exports of motor vehicles, aircraft and energy products. OPEC’s decision to extend output cuts caused higher oil prices, but markets are still concerned about the slowing global economy. Unemployment Rate for June expecting 5.5% today (previously 5.4% in May).
EUR continues weaker as Retail Sales for May was -0.3% monthly (versus 0.3% gain expected and previously revised to -0.1% in April). Automotive trade dropped 1.3% while food, drinks and tobacco sales also decreased. In addition, German 10-year bund yields decreased below the central bank’s deposit facility rate of -0.40%. Markets are still considering the nomination of Christine Lagarde to replace Mario Draghi as she is considered dovish and not trained as an economist. Chief Economist Philip Lane and Vice president Luis de Guindos may also assist Lagarde.
British pound highlights:
Outgoing Prime Minister Theresa May visited Scotland and stressed the integrity of the Union between the U.K.’s four nations. Leading Conservative candidate Boris Johnson supports leaving the European Union without a deal and this may also encourage the Scottish National Party to seek independence again. Theresa May opposes a hard Brexit and this political turmoil and Brexit uncertainty continues to affect GBP. New Car sales in June dropped 4.9% (fourth consecutive month of decline).