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USD Softens Across the Board

By OFX

The Greenback is generally continuing its softness from last week heading into the North American trading session. One reason for its soft trading is due to Friday’s employment data, which was generally disappointing as unemployment rate and average hourly earnings m/m missed expectation and printed at 4.0% and 0.2% respectively. On the only good note, non-farm employment change did beat expectations and printed at 213K. Another reason is the lack of an immediate impact of the US – China tariff war so far. US Dollar index has continued to drop again and is now at 93.74.

The only notable event risk today is Consumer Credit report in May due later this evening. Heavy hitting data will come in the latter part of the week where CPI in June, Initial Jobless Claims in July, Monthly Budget Statement in June, University of Michigan Sentiment in July and the Fed’s release of Monetary Policy Report to Congress will all release on Thursday and Friday.

The Loonie had mixed employment data on Friday and is currently holding onto its gains. Employment Change released better than expected at 31.8K, but Trade Balance and Unemployment rate disappointed releasing at -2.8B and 6.0% respectively. On Friday, Crude Oil did retrace some of Thursday’s loss and is slowly approaching back to its peak around $75.

Main event of the week will come on Wednesday when the Bank of Canada releases their rate decision. Even with the mixed employment data and drop in exports, analysts are still expected a 25 bps hike this Wednesday and another hike by the end of the year.

The EUR is broadly stronger as German Trade Balance in May released better than expected at 20.3B. This afternoon could see some euro volatility as European Central Bank chief, Mario Draghi gives an update in Brussels about the health of the economy and monetary policy to the European Parliament Economic and Monetary Affairs Committee.

This week’s big release from the EZ is Thursdays ECB Monetary Policy Meeting Accounts from the June meeting where an end of the QE stimulus programme was confirmed.

Sterling gapped higher this morning as Asian markets reacted positively to the news of UK Prime Minister, Theresa May’s cabinet agreeing to her plan for a future trading relationship with the EU after Brexit. The agreement sees an avoiding of a hard Irish border as the UK would levy EU taxes on its behalf, would end the free movement of people and end the European Court of Justice’s input in UK affairs. The agreement overall has been seen as towards the softer end of the Brexit scale with hardliners not happy at some of its proposals. The main fallout from the agreed common position is that Brexit Secretary, David Davis has resigned stating in his resignation letter that “the national interest requires of a Secretary of State in my Department that is an enthusiastic believer in your approach, and not merely a reluctant conscript.” A white paper is due later this week outlining the full approach the government will take and it appears holders of sterling like the soft-Brexit plan however not the political ructions it has caused internally within the Conservative party. After moving higher cable fell back on the news re: David Davis. The response to the plan from the EU will be closely monitored so it could be a very volatile week for the pound.

Away from Brexit politics we have the first official monthly print for GDP being released by the ONS tomorrow, there will still be quarterly prints like before however we will now get a monthly update of the month before lasts estimated performance (this release will give a prelim reading for May). We also have Manufacturing Production figures tomorrow and a speech by Bank of England Governor, Mark Carney on Wednesday.

Broad-based dollar weakness since Friday has seen equity markets and the commodity currencies rally as the chances of four rate hikes from the Fed this year receded slightly. All major Asian and European bourses are higher this morning. The only major release from Down Under this week is tonight’s NAB Business Confidence survey for June.

The Kiwi has also benefitted from risk-on trade from the US Jobs Report. It’s a very quiet week this week from NZ however we may get some movement on the back of Thursday night’s Business NZ Manufacturing Index reading.