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#16

US Market Insight: NFP, FOMC Minutes to Dominate Holiday-Shortened Week


With the Independence Day Holiday on the Forth of July, trading in the US will be focused on the monthly jobs report and minutes from the latest Federal Reserve meeting, which might reveal discussions about a rate hike, even when markets expect no change until at least the end of the year.

On Monday, the US commemorates its declaration of independence from Great Britain. Stock and bond markets will be closed, along with government offices.

The holiday-shorten week will be on Friday, when the Bureau of National Statistics will release its heavy-hitting non-farm payrolls report for June. After the disastrous May reading, which revealed only 38,000 newly created private sector jobs, it is now expected to post 179,000 jobs.

That would be the third straight month of a reading under 200,000.

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#17

June ISM non-manufacturing expected 56.5 vs 53.3 expected

Details of the June 2016 ISM non-manufacturing index

  • Prior was 52.9 (lowest since Feb 2014)

Details:

  • Employment 52.7 vs 49.7 prior
  • Price paid 55.5 vs 55.6 prior
  • New orders 59.9 vs 54.2 prior
  • backlog of orders 47.5 vs 50.0 prior
  • new export orders 53.0 vs 49.0 prior
  • imports 54.0 vs 53.5 prior
  • Full report
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#18

Initial jobless claims 254K vs 269K expected

Weekly US initial jobless claims data:

  • Prior was 268K (revised to 270K)

It's a great number and comes before the holiday-skewed week.

The improving trend in this series is tough to argue against.

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#19

Non-farm payrolls results for June 2016

  • Prior +38K
  • Two-month net revision -6K
  • Unemployment rate 4.9% vs 4.8% expected
  • Participation rate 62.7% vs 62.6% prior
  • Change in private payrolls 265K
  • Average hourly earnings 0.1% m/m vs +0.2% m/m exp
  • Average hourly earnings 2.6% y/y vs +2.7% y/y exp
  • Average weekly hours 34.4 vs 34.4 exp
  • Underemployment rate 9.6% vs 9.7% exp
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#20
New highs in AUD and NZD primarily, but the USD has come back against all its major counterparts including the JPY, which technically should be benefitting from the upturn in equities, though the 10yr yield has come off sharply also.  EUR/USD support ahead of 1.1000 was well touted and now confirmed as we are back trading above 1.1050, while Cable has also recovered off the lows, with pre 1.2900 bids again winning out.  1.3000 eludes for now to keep a fresh downside test on the table.  Stops seen through 1.3050 and more above 1.3100, but overall FX activity has calmed in the last few minutes, so some brief consolidation ahead of the NY cut.  Nearby strikes of note see good size EUR/USD 1.1050-55’s, 100.00’s in USD/JPY and 1.2990-00’s for USD/CAD.
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#21

USD Volatility: The Week Ahead


The U.S. economy may have added 287k jobs in June, but we’re not impressed. Judging from the performance of the dollar post payrolls, most forex traders share our views. When the report was first released, USD/JPY jumped to a high of 101.28, but it reversed quickly hitting a low of 99.99. However the pullback to 100 was short-lived with the currency pair bouncing back to its pre-NFP level within minutes. Part of this is due to the rise in U.S. stocks and general improvement in risk appetite. But 100 is also a very important technical level and it is clear that there were a lot of bids at that rate. Although job growth rebounded strongly, the unemployment rate rose more than expected and average hourly earnings growth slowed. Job growth was incredibly weak in May but instead of an upward revision, the report was revised down by another 27k. And that leaves the 2-month average at less than 150k. Jon Hilsenrath of the Wall Street Journal argues that this may be enough for the Fed to raise interest rates in September -- a view we completely disagree with.

While it's true that Fed Fund futures went from pricing in an 11% chance of tightening in 2016 to 22% post payrolls, there’s no reasonable case for a rate hike before the end of the year, especially since we don’t expect any of next week’s economic reports to provide upside momentum for the dollar. The most important piece of U.S. data scheduled for release next week will be U.S. retail sales, and between the decline in wage growth, the sharp drop in gas prices in June and lower spending reported by the Johnson Redbook survey, all signs point to lower consumer spending and a more restrained increase in consumer prices. Six Federal Reserve Presidents are scheduled to speak but only two (George and Bullard) are FOMC voters. Both have hawkish leanings but given the deterioration in U.S. data and Brexit uncertainty, they could indicate that more caution is needed on raising rates. With two monetary policy announcements, continued Brexit risks, U.S. retail sales, Chinese trade and GDP numbers on the calendar, we anticipate another volatile week for the greenback. There may not be a tremendous amount of consistency as the dollar should remain weak versus the yen but strong against the European currencies and mixed versus the comm dollars.

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#22

Dollar up more than 1% against yen as Japan stocks rally


The dollar rose more than 1% against the yen on Monday as Japanese stocks led a rally in Asian markets, boosted by a robust U.S. jobs report and hopes for additional economic stimulus in Japan.

USD/JPY hit highs of 101.95 and was last at 101.91, up 1.3% for the day. The pair had fallen to lows of 99.97 in the wake of Friday’s jobs report.

EUR/JPY advanced 1.22% to 112.43.

Japan’s Nikkei surged 3.6% after Prime Minister Shinzo Abe’s ruling coalition increased its majority in the upper house in parliamentary elections on Sunday.

The win for Abe’s coalition fed hopes for a fresh package of stimulus measures to spur economic growth.

Risk appetite had already been boosted after data on Friday showing that the U.S. economy added 287,000 jobs in June, well above the 175,000 jobs forecast by economists.

The stronger than expected jobs report indicated that the economic recovery is back on track.

But the data did little to alter the view that the Federal Reserve will stick to cautious plans for hiking interest rates after May’s payrolls figure was revised down to 11,000, the smallest monthly increase since 2010.

The euro edged lower against the dollar, with EUR/USD slipping 0.2% to 1.1027, not far from Friday’s two-week lows of 1.1001.

The pound also slid lower, with GBP/USD easing 0.15% to 1.2933, not far from its post-Brexit low of 1.2794 set last Wednesday.

Investors were looking ahead to the outcome of the upcoming Bank of England meeting later in the week.

The BoE could potentially ease monetary policy to cushion the U.K. economy from the impact of Brexit, which would also pressure sterling lower.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.32% at 96.62.

source

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#23

Fed Labor Market Conditions Remain in Negative For 6th Mth in June

Conditions in the US labor market improved in June, data showed on Monday, but remained in negative territory for the sixth consecutive month, coming in worse than expected.

The indicator, designed to illustrate expansion and contraction of labor market conditions, booked minus 1.9 during the sixth month of the year, compared to the up-revised figure of minus 3.6 snatched in May.

It hasn't booked a positive reading since December last year.

Economic desks had expected an improvement to 0.0 in June.


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#24

US NFIB small business optimism index June 94.5 vs 93.9 exp

US NFIB  June small business optimism index 12 July 2016

Data out a few moments ago. Not a price changer but adds to the general US picture.

The National Federation of Independent Business (NFIB) Small Business Optimism Index is a composite of ten seasonally adjusted components. It provides a indication of the health of small businesses in the U.S., which account of roughly 50% of the nation's private workforce.
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#25

US June import prices 0.2% vs. 0.5% estimate


YoY -4.8% vs. -4.6% estimate. Ex food and fuel YoY -1.7% in June

The US import prices came in at 0.2% for the month of June.  This comes after a 1.4% increase in the prior month. However, YoY the price of imported goods are still down -4.8%.  This is up from -5.0% last month but lower than the -4.8% estimate.  Of course the data is still working off the sharp fall in energy going back a year.  

The reaction in the market to the data is limited (USDJPY is down about 10 pips so far.  

Other details from the report:
  • import prices ex-fuel fell 0.3% after rising 0.3% in May
  • industrial supplies prices rose 2.1% after rising 6.2% in May
  • capital goods prices fell 0.3% after no change in May
  • auto prices unchanged\thi
  • consumer goods prices fell -0.2% after rising 0.2% in May
  • export prices rose 0.8% after rising 1.2% in May. Ex agricultural rose 0.5%
  • import prices ex-food and fuel fell 1.7% year on year in June
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#26

US June PPI +0.3% y/y vs 0.0% y/y expected

June US PPI

  • Prior was -0.1% y/y
  • Prices up 0.5% m/m vs 0.3% exp

Ex food and energy

  • +1.3% y/y vs +1.0% exp
  • +0.4% m/m vs +0.1% exp
The PPI estimates missed badly but, ultimately, it's proven tough for producers to pass costs onto consumers with wages stagnant.
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#27

US weekly initial jobless claims 254K vs. 265K est.

Last week initially reported at 254K.

The continuing claims came in at 2149K vs 2130K est. They were 2117K last week (revised from 2124K)
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#28

US June industrial production +0.6% m/m vs +0.2% m/m expected

US industrial data

  • Prior production was -0.4% m/m (revised to -0.3%)
  • Capacity utilization 75.4% vs 75.1% prior
  • Manufacturing production +0.4% vs +0.3% exp
  • Prior manufacturing production was -0.4% (revised to -0.3%)

More good news for the US dollar and the US economy.

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#29

Turkish coup bid crumbles as crowds answer call to streets, Erdogan returns

An attempted Turkish military coup appeared to crumble on Saturday after crowds answered President Tayyip Erdogan's call to take to the streets to support him and dozens of rebel soldiers abandoned their tanks in the main city of Istanbul.

At least 60 people were killed in violence that erupted on Friday after a faction of the armed forces attempted to seize power, officials said.

A successful overthrow of Erdogan, who has ruled Turkey since 2003, would have marked one of the biggest shifts in the Middle East in years, transforming one of the most important U.S. allies while war rages on its border. A failed coup attempt could still destabilize a pivotal country.

Erdogan, who had been holidaying on the southwest coast when the coup was launched, flew into Istanbul before dawn on Saturday and was shown on TV among a crowd of supporters outside Ataturk Airport.

The uprising was an "act of treason", and those responsible would pay a heavy price, he told reporters at a hastily arranged news conference. Arrests of officers were under way and it would go higher up the ranks, culminating in the cleansing of the military, he said.

Addressing a crowd of thousands of flag-waving supporters at the airport later, Erdogan said the government remained at the helm, although disturbances continued in Ankara.

However, in an emailed statement from the Turkish military General Staff's media office address, the pro-coup faction said it was determinedly still fighting.

Calling itself the Peace at Home Movement, the faction also called on people to stay indoors for their own safety.

Rebel soldiers who had taken control of military aircraft were still firing from the air and fighter jets had been scrambled to intercept them, Prime Minister Binali Yildirim said, underscoring the ongoing uncertainty.


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#30

NAHB July US housing market index 59 vs 60 expected

Housing data from the National Association of Home Builders

  • Prior was 60
  • Single family homes 63 vs 64
  • Prospective buyers 45 vs 46
  • Sales over the next six months 66 vs 69