The ECB pressed on with the 25 basis point cut today taking the main financing rate to 4.24% from 4.4%. It was the first cut rates since 2019. The cut was widely anticipated. However, ECB Pres. Lagarde was reluctant to talk about a future path for rates saying that we are not pre-committing to a particular rate path and that the rate cut today is justified by the confidence in the path to lower inflation ahead. However the ECB president also commented how the path may be a rocky one. Later, ECB sources comments expressed apprehension in the pre-commitment to a rate cut. There was also an understanding that a July cut was likely off the table and that September would be the first chance to reevaluate for another cut.

So although ECB went through with "what they promised" or greatly implied, it was a hawkish cut.

Looking at the strongest to the weakest of the major purchase today, the, EUR ended the day mixed with gains vs the USD, GBP and NZD and declines v the JPY, CHF and AUD. The EUR was nearly unchanged vs the CAD. The Bank of Canada also happened to cut interest rates this week (yesterday).

Forex
The strongest to weakest of the major currencies

For the day, the CHF is ending the day as the strongest of the major currency pairs. The USD is the weakest one day ahead of the US jobs report which will be released at 8:30 AM ET tomorrow. The FOMC will meet next week on Wednesday with expectations of no change in policy. Fed officials have already said that they need more information on the path for inflation before contemplating easing policy. They are in no hurry.

The expectations for the jobs report tomorrow are:

  • Non-farm payroll estimate 185K (vs 175K)
  • Private payroll, 170K vs 167K last month.
  • Manufacturing payrolls, 5K vs 8K last month
  • Unemployment rate 3.9% est vs 3.9% last month
  • Average earnings MoM 0.3% versus 0.2% last month
  • Average earnings YoY 3.9% versus 3.9% last month
  • Average workweek (hrs) 34.3 versus 3.4% last month
  • labor force participation rate:No estimate versus 62.7% last month
  • U6 underemployment: No estimate versus 7.4% last month

Ahead of the report, initial jobless claims rose to 229K which was above the expectations of 220K

Canada will also release its jobs report tomorrow with expectations for employment change coming in at 24.8K with the unemployment rate rising to 6.2% from 6.1% last month.

Today, the US stock market traded up-and-down ahead of the key events ahead.

  • Dow Industrial Average average rose 0.20%
  • S&P index fell -0.02%
  • NASDAQ index fell -0.09%

Recall from yesterday, both the S&P and NASDAQ index closed at record levels.

In Europe today, the major indices moved higher led by the Italy's FTSE MIB (+0.95%). Spain's Ibex rose by 0.80% and Germany's DAX rose 0.41%.

In the US debt market, yields are in the day little changed. The 10 year yield has moved from 4.638% last Wednesday to 4.289% currently – a decline of -35 basis points. For today:

  • 2 year 4.730%, -0.1 basis points
  • 5 year 4.301%, -0.5 basis points
  • 10 year 4.289%, changed
  • 30-year 4.436%, -0.5 basis points

The price of crude oil moved higher today in trades at $75.63. With one day to go in the week, the price is below its 200 week moving average at $75.97. A close below that moving average level would be the first since January 2021.