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US 10-Year Bond Yield Eases After Fed’s Beige Book Report
Summary: It was a repeat performance for the US Dollar overnight, advancing in Europe only to give up its gains in New York. The Dollar Index (USD/DXY) a measure of the US currency’s value against 6 major rivals, closed flat at 89.89 after advancing to 90.246 highs in European trading. The benchmark US 10-Year Treasury Yield eased 2 basis points to 1.59% following the release of the Fed’s Beige Book. The report which is an account of business conditions in several Fed districts, indicated that the overall economy expanded at a moderate pace. Elsewhere, Australia’s economy expanded by 1.8% in Q1, bettering median expectations of a 1.5% rise. However, the current lockdown in Victoria (Australia’s 2nd most populous State) warned of slower growth ahead. AUD/USD slid initially to 0.77151 (overnight low) as the Greenback rallied in Europe. By the close of trade in New York, the Aussie climbed back to close little changed at 0.7750 (0.7753 yesterday). The Euro fell to 1.2164 from its opening at 1.2218, bouncing back above 1.22 to close at 1.2208 in New York. Sterling rallied to settle at 1.4168 after hitting an overnight low at 1.41113. British Prime Minister Boris Johnson affirmed that the UK is on track to fully reopen on June 21. Against the Canadian Loonie, the US Dollar slid to 1.2035 (1.2070 yesterday). Crude Oil prices rose for the second day running following OPEC’s decision to stick to a plan to restore supply to the market gradually. Brent Crude Oil rose to close at USD 71.30 (USD 70.58). USD/CNH steadied to close at 6.3835, little changed from 6.3850 yesterday. Global bond yields were mixed. Germany’s 10-Year Bund rate settled at -0.20% (-0.18% yesterday). Wall Street stocks settled with modest gains. The DOW was last at 34,600 (34,595) while the S&P 500 was up at 4,207 (4,203 yesterday).
Other data released yesterday saw Germany’s April Retail Sales dip to -5.5%, underwhelming forecasts at -2.2%. UK Mortgage Approvals climbed to 87,000 from a previous 82,700. Eurozone PPI in April rose by 1.0%, beating estimates of 0.9%, and a previous 1.1%. Canada’s April Building Approvals beat forecasts to print at -0.5% from -4.8%.
On the Lookout: Today sees the release of US May Private (ADP) Payrolls report as well as Weekly Unemployment Claims. Other reports today see Australia’s Markit Composite and Services PMIs (May), April Trade Balance (Surplus f/c to climb to +AUD 7.9 billion from +AUD 5.574 billion). Markets will look at the breakdown and progress of exports and imports. Australian Final Retail Sales for April follows (f/c 1.1% from previous 1.3%). China releases its Caixin Services PMI report for May (f/c 56.3 from 56.3). Europe kicks off with European (Spanish, Italian, French and German) Services PMI’s (forecasts are for flat or better). Eurozone Final Services PMI follows (f/c 55.1 from previous 50.5). UK Services PMI follows (f/c 61.8 from previous 61.0). The US follows with its Weekly Unemployment Claims (f/c 3,615k from previous 3,642k)/ US ADP Private Payrolls (May) is next (f/c 650,000 from 742,000). US Markit Services PMI follows (f/c 70.1 from 64.7). Finally, the US ISM Services/Non-Manufacturing PMI report follows (f/c 63.0 from 62.7).
Trading Perspective: The countdown to tomorrow’s US May Payrolls report begins. The results will help market participants and investors get more signs of an economic rebound and rising inflation. Traders will look into the various revisions prior to the release of the data. ACY’s FInlogix Economic Calendar has the NFP Payrolls gain at 664,000 from April’s weak 266,000. The range of estimates in this number are from 645,000 to 664,000. Average Hourly Earnings (Wages) will also be scrutinised. Estimates are from 0.2% (April’s Wages were up 0.7%).
Today sees the release of US ISM Services PMI’s which is a survey of purchasing managers and a leading indicator of economic health.
The US Dollar’s rally was halted and reversed as the US 10-year yield eased following the Fed’s Beige Book report which highlighted the economic recovery’s pace as moderate. Tomorrow’s Payrolls report is one of the most important economic releases for the month. Which could set the stage for big moves in FX (certainly and hopefully bigger than what we have seen this week).
Happy Thursday and trading all.
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