Market Update – 3 June 2022

MARKET WRAP – 3 June 2022

Equity markets bounced sharply ahead of tonight’s employment report from the U.S. The NASDAQ closed +2.5% while the S&P 500 finished the session +1.7%.  U.S yields were flat while crude gained 1.7% to close at $117.66 a barrel.  The USD was broadly softer including against the AUD/USD which peaked at .72695. Asian equities fell on Thursday with the Nikkei down 0.16% and Hang Seng losing 1%. The ASX ended 0.8% lower as tech stocks fell. AUDUSD fell to a low of 0.7141 before bouncing back up towards the day’s high of 0.7187. European equities were mixed on the open with Eurostoxx 50 +0.7%, while the FTSE100 fell 1%.

Into the NY morning and US ADP Employment for May printed at 128k, down from a negatively revised 202k and well short of expectations of 300k. Released shortly afterwards and weekly jobless claims data was modestly better than expected with initial claims at 200k compared to forecasts of 210k while continuing claims were 1.309 mio compared to forecasts of 1.340 mio. The second round of US data saw April Factory Orders rising by 0.3%, down from 1.8% and below expectations of 0.7%. Durables Goods Orders for April meanwhile was revised up to +0.5% from an initial reading of +0.4%.

Wall St was a little mixed in early trade though pushed higher into the NY afternoon with risk generally supported. European markets also moving higher with the CAC and DAX closing up more than 1% on the day. Wall St remained well supported into the close with the NASDAQ  +2.5%, the S&P 500 +1.7% and the Dow Jones +1.2%.

FX

 During the London Lunch, AUD/USD moved up to 0.7213 highs while NZD/USD advanced, hitting a high of 0.6518. EUR/USD moved higher, reaching 1.06965 and GBP/USD traded up to daily highs of 1.25585. USD/JPY fell back to 129.60 and USD/CAD fell to lows of 1.2642. The USD weakened in the aftermath of the data with the local unit moving up to highs of 0.7233. NZD/USD hit 0.65305 while EUR/USD and GBP/USD topped out at 1.0717 and 1.2570 respectively. USD/JPY fell towards 129.50 while USD/CAD made lows of 1.26325.

No reaction to the second round of US data though where the USD was generally weaker over the NY morning, allowing AUD/USD to move up to highs of 0.7248 into the London rate set. NZD/USD made highs of 0.6547 while EUR/USD moved up to 1.0730. USD/CAD down to lows under 1.2600 with the fall helped by BOC commentary suggesting rates may need to move above 3% to control inflation.

Little respite for the greenback over the NY afternoon with majors slowly but steadily adding to gains. AUD/USD moved up to highs of 0.72695 with NZD/USD up to 0.6565, EUR/USD reached 1.07485 and GBP/USD topped out at 1.2587. USD/CAD fell to lows of 1.2565 though USD/JPY remained largely on the sidelines.

Market Outlook

A rather quiet data day ahead in Asia, with investors looking to equity markets for the next clear direction. Later tonight we will see the release of the US employment report for May.  Payrolls are expected by markets to post another solid increase, although the pace of gains will likely slow as re-opening momentum is expected to fade. Wage growth measures are also expected to moderate, reducing the odds for a wage-price spiral.

The AUD/USD chewed through significant offering interest on its way to a high of .72695 overnight.  Further supply is expected ahead of .73c while demand remains back toward .71c.

Overnight Currency Ranges 

Source Bloomberg