Nonfarm Payrolls, Wage Growth and Tariffs Keep the USD in Focus

Earlier in the Day:

Economic data released through the Asian session this morning was limited to May household spending figures out of Japan.

• Month-on-month, household spending fell by 0.2%, which was worse than a forecasted 0.1% decline, following April’s 1.6% fall.
• Year-on-year, spending slid by 3.9%, which was worse than a forecasted 1.5% fall, following April’s 1.3% decline.
• Year-on-year, the slide was attributed to a fall in spending on clothing & footwear (-8%); on furniture & household utensils (-7.6%); food (-5.3%); on fuel, light & water charges (-4.9%) and spending on culture & recreation (-4.3%), with household spending on other consumption expenditures falling by 10.4%.
• The slide in spending was partially offset by a 20.3% rise in spending on education and 5.8% rise in spending on housing.

The Japanese Yen moved from ¥110.631 to ¥110.619 against the Dollar upon release of the figures, which will have been yet another disappointment for the BoJ and Japanese government. At the time of writing, the Japanese Yen was down 0.07% to ¥110.72.

Elsewhere, the Aussie Dollar was up 0.18% to $0.7400 at the time of writing, with the Kiwi Dollar up 0.27% to $0.6803 the pair finding much needed support in spite of Trump’s threat of excessive tariffs on Chinese goods on Thursday, which came ahead of today’s planned roll out of tariffs by both the U.S and China.

In the equity markets, it was a mixed start to the day, with the Nikkei and ASX200 rallying by 1.03% and by 0.78% ahead of the close, while the Hang Seng and CSI300 were down 0.48% and 0.12% respectively, the pair on the way to another week of heavy losses as fears of an escalation in the trade war placed further downward pressure through the week.

The Day Ahead:

For the EUR, following some impressive factory order figures out of Germany on Thursday, focus shifts to May industrial production numbers out of Germany that are also forecasted to be a positive for the EUR, following April’s 1% decline.

Outside the data, immigration has been the hot topic amongst member states and within the German coalition government, with threats of border shut downs by the likes of Austria undermining Monday’s agreement. Fears of a disintegration of the German coalition government abated on Thursday, following the Social Democrat agreement with the Merkel’s CDU party on handling illegal migrants, providing support for the EUR early on.

At the time of writing, the EUR was up 0.03% to $1.1694, with today’s data and noise from the Oval Office the key drivers through the day.

For the Pound, stats are limited to June house price figures, which will unlikely have an impact on the Pound following BoE Governor Carney’s speech on Thursday that left the door open for an August rate hike.

While economic data has been supportive of a more hawkish BoE, Carney’s view that Britain will likely have a smooth exit from the EU eases concerns of a possible hold ahead of any final agreement between the EU and Britain, though the latest trade spat could pin back a move should economic indicators begin to point to a slowdown in trade that could threaten the global economic outlook.

At the time of writing, the Pound was down 0.02% to $1.3224, Brexit chatter and noise from the Oval Office the key drivers through the day.

Across the Pond, it’s a big day for the Dollar, with stats scheduled for release through the day including June’s wage growth, nonfarm payroll and unemployment rate figures, along with May’s trade data.

Following softer than expected ADP nonfarm employment change figures released on Thursday, any better than forecasted numbers will provide strong support for the Dollar, though wage growth will likely remain the main area of focus, the U.S unemployment rate already sitting at 3.8%.

On the trade front, the markets will be eyeing trade balances between the U.S and key trading partners, China and Germany in particular, though trade tariff chatter from the Oval Office will also need to be considered, the trade war considered to be of greater significance than the stats through the day.

Dollar weakness is to be expected in the event of tariffs being rolled out, with the risk off sentiment a negative for U.S Treasury yields.

At the time of writing, the Dollar Spot Index was down 0.01% to $94.389, with today’s stats, and the Oval Office in focus.

For the Loonie, after a particularly quiet week, this afternoon’s June employment and Ivey PMI numbers and May’s trade data will be in focus, the markets now looking for reasons why the BoC won’t be willing to lift rates in the coming months.

Positive stats could see the Loonie rally back to $1.30 levels, with sub-$1.30 levels on the cards next week ahead of the BoC interest rate decision, though market tension over trade wars will need to have eased, retaliatory measures by the U.S to Canada’s tariffs on U.S goods still a possibility in the coming days.

At the time of writing, the Loonie was down 0.05% to C$1.3138, with today’s stats and trade war chatter the key drivers through the day.