Euro Dips, ECB Dovish Hike; Dollar Mixed into US Payrolls

Kiwi, Aussie Outperform, USD/JPY Eases; Yields Tumble

Summary:

The Dollar finished mixed against its rivals heading into today’s US Non-Farm Payrolls report. A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) eased modestly to 101.05 from 101.20 yesterday.

The Federal Reserve’s FOMC hiked its prime discount rate 25 basis points to 5.25%. Fed Chair Jerome Powell signaled that a pause was possible. Wall Street stocks tumbled. The DOW closed at 33,103 against yesterday’s 33,663.

The Euro (EUR/USD) dipped to 1.1015 (1.1065) after the ECB hiked rates by 25 basis points, which was smaller than expected. ECB officials said that more rate increases were needed.

New Zealand’s Kiwi (NZD/USD) outperformed, soaring 1.14% against the US Dollar to 0.6280 (0.6205). The Australian Dollar gained 0.77% to 0.6692 from 0.6645 yesterday. Australia’s March Trade Surplus increased, due to a rise in exports to China.

Against the Japanese Yen, the Greenback slid to 134.23 (134.55) weighed by lower US bond yields. The benchmark 10-Year US Treasury yield fell 5 basis points to 3.38%.

The US Dollar tumbled against the Canadian Loonie to 1.3538 from 1.3625. Bank of Canada Governor Tiff Macklem said that the BOC was prepared to raise interest rates further if inflation stays above their 2% target.

The USD/CNH pair (Dollar-Offshore Chinese Yuan) slid to 6.9170 against yesterday’s 6.9350. Against the Singapore Dollar, the Greenback (USD/SGD) slumped to 1.3285 from 1.3345.

Economic data released yesterday saw the Eurozone Final Services PMI slip to 56.2 from 56.6. The UK Final Services PMI rose to 55.9 from 54.9, beating expectations at 54.9.

US Weekly Unemployment Claims rose to 242,000, up from 229,000. Canada’s IVEY PMI fell to 56.8 from 58.2, missing median estimates at 59.0.

EUR/USD – The shared currency fell to 1.1015 from 1.1065 yesterday after the ECB increased interest rates by 25 basis points, which was less than markets expected. In volatile trade, the Euro soared to an overnight high at 1.1092. The EUR/USD fell to a recorded low at 1.0986 before settling at 1.1015 in late New York.AUD/USD – The Aussie Battler rallied against the Greenback to finish at 0.6692 from yesterday’s 0.6645. An increase in Australia’s Trade Surplus due to a rise in exports to China, lifted the AUD/USD pair. Overnight, the Aussie traded to a high at 0.6706.USD/JPY – The Greenback eased against the Japanese Yen to 134.23 from 134.55 yesterday. The fall in US bond yields weighed on this currency pair. In volatile trade, the overnight low recorded was 133.50. The overnight high traded was at 134.88.NZD/USD – The Kiwi found its wings, soaring to close at 0.6280 against yesterday’s 0.6645. The overnight high traded was at 0.6702 while the overnight low recorded was at 0.6640. New Zealand’s 10-year treasury yield edged up to 4.07% (4.06%).On the Lookout:

Welcome to Payrolls Friday! The US Non-Farms Payrolls report (April) is the highlight of today’s economic calendar. Most economists are looking for an easing in the employment number at 181,000 against a previous 236,000.

Other data released prior to the US Payrolls report kick off with the RBA’s Monetary Policy statement (11.30 am Sydney), China’s April Caixin Services PMI (f/c 58 from 57.8 – ACY Finlogix).

Switzerland kicks off Europe with its April Unemployment Rate (f/c 2% from 2%). Germany follows with its March Factory Orders (m/m f/c -2.2% from 4.8% - ACY Finlogix). Watch this set of data, there is wide divergence between the predicted current number from the previous one. Up next is Switzerland’s April Inflation Rate (y/y f/c 2.8% from 2.9%).

France releases its March Industrial Production (m/m f/c -0.3% from a previous 1.2% - ACY Finlogix).

Germany releases its April Construction PMI (f/c 43.4 from 42.9 – ACY Finlogix). Italy follows with its March Retail Sales (m/m f/c 0.6% from -0.1% - ACY Finlogix).

The Eurozone releases its March Retail Sales report (m/m f/c -0.1% from -0.8%; y/y f/c -3.1% from -3% - ACY Finlogix).

Canada starts off North America with its April Employment report, Canadian Unemployment Rate (f/c 5.1% from 5.0 % - ACY Finlogix), Canada’s April Employment Change (f/c 20,000 from a previous 34,700 – ACY Finlogix).

Finally, the US releases its April Non-Farms Payrolls (f/c 180K from 236K – ACY Finlogix), US April Unemployment Rate (f/c 3.6% from 3.5% - ACY Finlogix) and US April Average Hourly Earnings (f/c 0.3% from 0.3% - ACY Finlogix).

Trading Perspective:

Markets are expecting a drop in the US April Non-Farms Payrolls to around 180,000 from 236,000 in March.

If the Payrolls number falls below the 180K level, say to 160K or lower, the US Dollar will tumble against its Rivals. A higher Payrolls report to say 200,000 will see the Greenback steady, with more gains possible. Expect consolidation heading into today’s US Payrolls. The overnight ranges should stay intact. Like Michael Duffer famously announced: “Let’s Get Ready to Rumble!”.

EUR/USD – Though the Euro dipped modestly against the Greenback, to 1.1015 from 1.1065, the recent range between 1.0980 to 1.1090 stayed pretty much intact. For today, look for immediate support at 1.0990 followed by 1.0960 to hold. Immediate resistance lies at 1.1040 and 1.1090. Ahead of the US Payrolls report, expect a likely range of 1.0980-1.1120. Trade the range.USD/JPY – The Dollar slid against the Japanese Yen to 134.23 from 134.55 yesterday after US bond yields dipped. The benchmark US 10-year rate closed at 3.38% from 3.43%. On the day, look for immediate resistance at 134.55 followed by 134.85 and 135.05. On the downside, immediate support is found at 133.85 and 133.55. A strong Payrolls report, followed by higher US bond yields could see a break above 135.00. For now, look to trade between 133.85-135.25.AUD/USD – The Aussie Battler rallied against the Greenback despite a rise in risk aversion. On the day, look for immediate resistance at 0.6715 followed by 0.6745 and 0.6785. On the downside, immediate support can be found at 0.6665 followed by 0.6635. Look for another choppy day in the Aussie Battler today, likely range 0.6650-0.6770.NZD/USD – The Kiwi found its wings and soared to 0.6280 New York close (0.6230). New Zealand’s bond rates stayed flat while those of the US Dollar fell. This enabled the NZD/USD pair to trade to an overnight high at 0.6298. For today, look for immediate resistance at 0.6300 followed by 0.6330 to hold. Immediate support lies at 0.6260, 0.6230 and 0.6200. Look for the Kiwi to trade a likely range today of 0.6640-0.6740 heading into the US Payrolls report.

Happy Friday and trading all. Top weekend as well.

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