US equities rose further, the S&P500 up 0.5% to a fresh record high. Bond yields were little changed, though, and currencies fell vs the US dollar. Market are anticipating a strong US jobs report tonight. Commodities, Brent crude oil futures rose 2.0% to $76, copper fell 1.2%, and gold rose 0.3%.
US ISM manufacturing survey fell to a still expansionary 60.6 (est. 60.9, prior 61.2). Prices paid surprised with a further rise to 92.1 - the highest level since 1979 (est. 87.0, prior 88.0). New orders slipped to 66.0 (est. 65.0, prior 67.0), and employment fell to 49.9 from 50.9. ISM cited rising demand and optimism, but increasing supply chain, hiring and cost pressures across almost all sectors. The Final Markit manufacturing PMI pulled back to be unchanged on the month at 62.1 (flash 62.6). Weekly initial jobless claims were slightly below expectations at 364k (est. 388k, prior revised to 415k from 411k, while continuing claims were higher at 3.469m (est. 3.340m, prior 3.413m).
FOMC member Harker said he supported a start to QE tapering late this year: "I am in the camp of starting the tapering process…I'd like to see it happen sooner rather than later. I'd like to see it being a slow, methodical process… We're doing $120 billion a month, if we cut back $10 billion each month, we'd be done in 12 months, right? I think that's a reasonable thing to do." On the policy rate, he said:” My forecast before was not touching the Fed funds rate until 2023. I'm still there right now… If we see inflation not behaving as we hoped, that is staying within our 2 percent-ish range, then I think we may have to act sooner”.
Overnight Currency Ranges
AUD/USD 0.7459 0.7507 (7 Month Low)
EUR/USD 1.1837 1.1884
GBP/USD 1.3753 1.3838
USD/JPY 111.03 111.64 (15 Month High)
NZD/USD 0.6962 0.7008
USD/CAD 1.2365 1.2446
USD/CNH 6.4598 6.4753
AUD/JPY 83.12 83.65
AUD/NZD 1.0703 1.0730
AUD/USD remains depressed around the fresh low of 2021, flashed before a few hours, despite rejecting further downside below 0.7459 amid the early Friday morning in Asia. That said, the quote consolidates the recent losses near 0.7470 as the key day begins.
A sustained increase in the coronavirus (COVID-19) cases could be marked as the key catalyst behind the AUD/USD weakness. Also weighing on the quote are mixed data at home, in contrast to the firmer US economics and hawkish Fedspeak that underpin the US dollar strength. Australia refreshed the 2021 covid count, unfortunately, with 49 new cases on June 30, per ABC News data. Following the news, state governments started pushing the centre towards faster vaccinations and ease the rejection of AstraZeneca jabbing. However, nothing changed and the National Cabinet is up for a meeting today to discuss the level of inoculation required for unlock. The meeting may convey news on how to speed up the vaccination and hence AUD/USD traders will be interested in hearing more about AstraZeneca vaccine usage for fresh impulse.
Talking about data, Australia Trade Balance for May eased below 10000M forecast but Imports and Exports recovered. Further, China Caixin Manufacturing PMI eased below forecast and prior readouts in June. On the other hand, US ISM Manufacturing PMI came in a touch softer than 61.00 expected but the components are promising, especially the inflation one. Additionally backing the US dollar was the weaker-than-expected Weekly Jobless Claims and its four-week average.
Looking forward, the pre-Non-Farm-Payrolls trading lull may restrict AUD/USD moves amid a light calendar. However, the covid woes in Asia-Pacific and the recently hawkish Fedspeak may keep the bears hopeful.
The AUD/USD continued to trickle lower overnight and demand is expected ahead of 0.7450 but more significantly ahead of 0.7420 while offering interest remains constant all the way to 0.7600.
Event Risk Data Today
Australia: Markets expect May housing finance approvals to show a further decline in construction-related finance associated with the Federal HomeBuilder scheme more than offset by an uplift in investor lending. The wider picture on established housing markets remains positive with both sales volumes and prices sustaining strong gains through April and May. Overall, markets expect a 5% rise in total approvals, investors up 6% and owner-occupiers up 4% the latter dragged down by a 10% decline in construction-related loans. There are significant risks on both sides of the May numbers.
New Zealand: Ahead of the June update, ANZ consumer confidence has been trending higher.
US: Markets will look for 750k jobs to be created inJune Nonfarm Payrolls, with further strong gains to follow in the second half. This will drive unemployment and underemployment lower over the period, despite a rise in participation as supply heals. Hourly earnings are expected to advance a further 0.4%. The Trade Balance Deficit is expected to widen further to $70.9bn in May. Finally, May factory orders should rise 1.3% - the transport sector has served as a drag on orders growth.