Forex news for NY trading on July 6, 2017
- US stocks end with solid gains. The Nasdaq leads the charge.
- UK PM May: Cabinet has agreed position on Brexit negotiation with EU
- Crude oil settles at $73.80 up $0.86 on the day
- What's on the US economic calendar next week
- Believe it or not earnings are approaching...
- Baker Hughes US oil rig count 863 vs 858 expected
- Video: Talking markets with Dale
- The bond market continues to send warning signals
- European equity close: Quiet day but a strong week
- NY Fed Nowcast GDP forecast remains at 2.8%
- The New Zealand dollar finally bounced and it was the best performer this week
- Atlanta Fed Q2 GDPNow 3.8% vs 4.1% prior
- Canada June Ivey PMI 63.1 vs 62.5 prior
- Canada May international merchandise trade balance -2.77B vs -2.2B expected
- US June NFP rises 213K vs 195K expected
- US May trade deficit $43.1 billion vs $43.7 billion expected
- Canada June employment +31.8K vs +20.0K expected
- NZD is strongest, CAD is the weakest. Snapshot before employment data
In other markets as the week comes to a close shows:
- spot gold down $3 or -0.24% at $1254.84.
- WTI crude oil futures of $.86 or 1.18% at $73.80
In the US stock market:
- S&P index rose 0.85%
- NASDAQ index rose 1.34%
- Dow industrial average rose 0.41%
In the European stock market,
- German DAX rose 0.26%
- France's CAC rose 0.18%
- UK's FTSE rose 0.65%
- Spain's Ibex rose 0.39%
- Italy's FTSE MIB rose 0.05%
- PS I 20 rose 0.55%
A 5- day snapshot of the winners and loser in the major stock indices from around the world, show that Spain's Ibex was the biggest winner with a gain of 2.93%, followed by the Nasdaq at 2.46%. The Shanghai composite index and Japan's Nikkei index were the big decliners (-3.52% and -2.32% respectively).
In the US debt market today, yields moved lower. The 2-10 spread is down to 28.5 basis points as it continues to contract. Last Friday it was at 33 basis points.
For the week, the shorter 2 year yield moved higher while the longer end moved lower:
- 2 year moved from 2.528% last Friday to 2.536% this week
- 5 year moved from 2.736% last Friday to 2.716% this week
- 10 year moved from 2.858% last Friday to 2.8217% this week
- 30 year moved from 2.99% last Friday to 2.9293% this week.
Today the market was faced with 2 key events.
- The start of the US/China trade war
- The US employment report
Canada also release their employment report (+31.8K jobs vs 20K expected, but the unemployment rate rose to 6.0% vs 5.8% expected). but it played second fiddle to the happenings in the US.
The trade tariffs between the US and China went into effect at midnight US times. Each imposed $34B of tariffs on each others goods. Trump vowed to add to the amount by $16B and China said they would match. Where this trade situation ends, no one really knows. For the US, since they import more goods from China, can raise tariffs on more goods and as a result, "win the game" by exerting the most economic pressure. However, there is the "non-tariff" pressure that may equal the playing field for China. For example, they could delay import clearance of time sensitive agricultural products into China. China is also strategically targeting the Trump base in the heartland of the US.
The impact was somewhat muted as NY traders entered (stocks were down, but not by a lot), but the end game is still up in the air (and who is to say the dollar weakness today is not a reflection of flows out of the US)..
Regarding the US employment report, it seemed to have the biggest impact on the price action..
The Non Farm Payroll came in stronger than expected at 213K vs 195K. Moveover, prior month numbers for jobs were revised higher by 37K.
However, the wage data (+0.2% vs 0.3% and 2.7% YoY vs 2.8% expected) was weaker than expected.
Also, the unemployment rate backed up to 4% from 3.8% expected. That is the number that gets most of the play on the nightly news broadcasts.
The weakness from the wages and the unemployment rate are really not enough to alter the course of the Fed's gradual tightening bias. However, it was sufficient enough to weaken the USD in trading today.
For the day, the USD was the weakest of the majors (see the chart above). The decline was helped by a flight into the risk pairs like the NZD and the AUD. Both those currencies vs the US made new lows for the year this week (NZDUSD fell to the lowest since June 2016 and AUDUSD fell to the lowest level since January 2017). So they were ready for a run higher. Helping was a roaring stock market in the US on the back of the "Goldilocks" numbers that were not too hot and not too cold but just right. The tech heavy Nasdaq rose 1.34%. The S&P rose 0.85%. That was enough to send money to more "risky" currencies - at least for the day - and out of the greenback.
Trade wars can be a big problem the longer they go on and the deeper the parties get. For all intents and purposes, the US is in a skirmish with EU, Canada, Mexico and China. All have the potential to hurt if they go on.
Pres. Trump is playing the game of chicken in an effort to get parties to the negotiation table and level the trade playing field. We will see if the tactics work in the end.
For today, the market put those issues on the back burner and focused instead on the jobs report. What will next week's focus be?
Have a great, safe, and restful weekend.
