Breaking News
Get 45% Off 0
🌊 NVIDIA ripple effect: Track AI stocks' response to chip giant's earnings
Explore AI Stocks

U.S. Dollar Shrugs Off ISM But Could Crash On NFPs

By Kathy LienForexMay 06, 2020 03:56
ph.investing.com/analysis/us-dollar-shrugs-off-ism-but-could-crash-on-nfps-31453
U.S. Dollar Shrugs Off ISM But Could Crash On NFPs
By Kathy Lien   |  May 06, 2020 03:56
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
0.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/JPY
0.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AUD/USD
+0.03%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NZD/USD
-0.02%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CAD/USD
0.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
0.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Investors took the U.S. dollar and U.S. equities higher on Tuesday following better than expected data. Service sector activity contracted at its fastest pace since 2009, but the decline in non-manufacturing ISM from 52.5 to 41.8 was better than the market’s 38.0 forecast. This cold comfort ahead of Friday’s jobs report was enough to ease the market’s concerns, but the details of the report give us no reason to be optimistic about non-farm payrolls. The employment component of the report dropped to its lowest level ever and the same was true for new orders. This deterioration in two of the most telling aspects of the service sector illustrate the depth of the economic contraction in April. The trade balance in March also increased slightly more than expected. USD/JPY is biding its time, but tomorrow’s ADP report, which is predicted to show -21 million private sector job losses could drive the pair to 106.00. 
 
Meanwhile, one of the big stories for the euro today was the German Constitutional Court’s ruling that part of the European Central Bank’s bond-buying program breached its mandate. Although the euro traded sharply lower in response, it recovered a large part of its losses by the end of the North American trading session. Despite the initial response, the ruling has no affect on the central bank’s current bond-buying activities or its Pandemic Emergency Purchase Program. The ECB needs to provide justification for its bond buys but, at the end of the day, the Bundesbank is unlikely to restrict the ECB’s ability to do what it takes to mitigate disruption in the financial markets during a major global economic crisis. Many view this as a jab at the EU Court of Justice rather than the ECB as it supported the central bank’s controversial policy, which the Germans saw as a overreach in power. For the central bank, the only real implication is that it will come under greater scrutiny. Eurozone data remains weak with producer prices falling for the second straight month. Retail sales are scheduled for release tomorrow and with contraction in spending in Germany and France, the broader release is expected to deteriorate as well. 
 
The best performing currency today was the Australian dollar, which rallied after the Reserve Bank of Australia’s monetary policy announcement. The RBA left interest rates unchanged, a decision that was widely anticipated. It said it would not raise interest rates until there was progress made to full employment and it was confident that CPI was sustainably in target. Instead, it is ready to scale up bond purchases and do what is necessary to support jobs, incomes and businesses. Its official forecasts are due for release on Friday, but broadly, the central bank expects the economy to contract 10% in the first half of the year, fall 6% over the year and for the jobless rate to peak at 10% in the coming months and settle above 7% at the end of next year. While these forecasts are grim and Australian PMIs were revised slightly lower, AUD rallied as the central bank did not signal an immediate need for additional easing. Australian retail sales are scheduled for release tonight which could be a big mover for Australian dollar.
 
The Canadian dollar also rebounded on better-than-expected trade data and higher oil prices. Canada’s trade balance widened to -1.4 billion from -0.9 billion, which was less than the -2.5 billion consensus forecast. The price of oil rose to its highest level in three weeks, supporting the move in the currency. The New Zealand dollar is in focus tonight with quarterly labor market numbers scheduled for release. Economists are looking for the jobless rate to spike, but New Zealand’s labor market numbers may not be terrible because the data is for the first quarter and New Zealand’s lockdown began on March 25, the very last week of Q1. The economy is also reopening, so investors may look past weakness.
U.S. Dollar Shrugs Off ISM But Could Crash On NFPs
 

Related Articles

U.S. Dollar Shrugs Off ISM But Could Crash On NFPs

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Apple
Continue with Google
or
Sign up with Email