Thursday June 3, 2010 - 20:29:00 GMT
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Forex Blog - Morning Report (Trade the News)
Morning Report Friday 2 June 2010
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US equities, US treasury yields and commodities held recent gains, but risk currencies weakened. The markets are expecting a solid US payrolls report tonight, with even President Obama opining, but there were titbits of news which restrained risk appetite, such as a weak US retail activity report, hawkish comments from Fed members Hoenig and Lockhart, and a consultant's report that the SNB may cease EUR/CHF intervention. The S&P500 is up 0.3%, but banks are down 1.4%. The CRB commodities index is up 0.8%, oil +2.3% on lower inventories, but copper -2.7% as one of the world's largest producers, Freeport, said China demand could decline. US 10yr treasury yields rose 3bp. European government bond yields rose slightly, Portugal by 13bp, and Italy now within 5bp of the May panic high.
The US dollar index rose from 86.50 to 87.25, an area it has encountered strong resistance since May. EUR declined from early Europe, 1.2300 to 1.2153, making it the day's worst performer (ex-SEK). USD/JPY hovered around its day high of 92.50.
AUD firmed slightly after the Sydney close, to 0.8522, but then followed the EUR down to 0.8365, currently at 0.8420.
NZD fell from 0.6900 to 0.6785, currently at 0.6830. AUD/NZD drifted off 1.2380 to 1.2310.
US ISM non-manufacturing survey steady at 55.4 in May. This survey has been unchanged at 55.4 for three months running, implying a steady pace of expansion of the services and construction industries covered. Business activity accelerated to 61.1, its highest in four years, but new orders dipped 1.2 pts to 57.1. Employment edged up to 50.4, its highest since late 2007 and the first time since then that the survey has found an increase in employment.
US ADP private payrolls grew 55k in May, down from revised 65k in April. This slight moderation in jobs growth is consistent with Westpac's view that the official payrolls report later this week will show moderating private sector jobs growth, within a sharply higher government Census worker-boosted payrolls total.
Still on the US labour market, initial jobless claims fell 10k to 453k last week, though the figure was partly estimated due to the Memorial Day holiday so may be subject to larger than usual revision. In the prior week continuing claims rose from 4635k to 4666k. Neither result is especially strong, consistent with the job market not really continuing to strengthen. Also, Q1 productivity growth was revised from 3.6% to 2.8% annualised, so unit labour costs were revised from -1.6% to -1.3%.
US factory orders up 1.2% in April, reflecting a revised 2.8% (from 2.9%) rise in durables, and a 0.1% fall in non-durables. Factory stocks rose 0.5%.
Japan's MOF capital spending survey weaker than expected in Q1. Capital spending declined by 11.5%yr in Q1. This was below market expectations for a 9.6%yr fall, although an improvement on the decline to Q4 (-17.3%yr). All in all, the Q1 outcome suggests modest downside risks for the second estimate of Q1 GDP.
Euroland retail sales down 1.2% in April. That makes three out of four months this year so far that sales have fallen. Sales volumes are contracting at an annual pace of 1.5% yr.
Euroland PMI services revised from 56.0 to 56.2 in May, up from 55.6 in April. That lifted the composite PMI from 56.2 to 56.4, down from 57.3 in April.
UK PMI services edges up from 55.3 to 55.4 in May, but still well down on Feb's 58.4. In other news, the Nationwide reported a 0.5% increase in house prices in May, for an annual growth pace of 9.8% yr, down from 10.5% yr in April.
AUD/USD and NZD/USD outlook next 24 hours: Currencies will spend today's domestic sessions waiting for tonight's US payroll report. AUD should be supported at 0.8350 for another run up to 0.8500. NZD should make another attempt on 0.6900.
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