• USD: Lower, improving risk appetite and rising global equity markets
  • JPY: Lower, Tankan manufacturing improves less than expected, CAPEX spending falls
  • EUR: Higher, manufacturing PMI and German retail sales rise, ECB expected to hold policy steady
  • GBP: Higher, manufacturing PMI rises to its highest level since last May
  • CAD and AUD: AUD & CAD higher, Australia's building approvals fall, crude tops $71

Overview

An interesting start to the second half of 2009 which finds the USD trading lower pressured by rising equity markets, higher crude prices and report of improving manufacturing PMI's in China and Europe. China's manufacturing PMI rose for the fourth consecutive month to 53.2 from 53.1 in May. Manufacturing PMI's in the EU, UK and Switzerland rose to their highest level since the credit crisis emerged last September. The improvement in the manufacturing PMI's sparked demand for global equities and speculation that the global recession may be nearing an end. The CAD and EUR performed the best. GBP, AUD and JPY underperformed. The USD was also pressured by comments from the Fed’s Yellen. Yellen said that interest rates may stay near zero for the next several years because of the severity of the recession. Today's US economic data was mixed. June ADP employment posted a bigger than expected drop in private sector job losses and construction spending declined more than expected. US manufacturing ISM and pending home sales posted modest improvement. Equity markets and the USD remained on the defensive after the release of today’s data. Focus turns to the release of US unemployment for June and ECB policy meeting Thursday. US unemployment is expected to rise but at a slower pace. ECB officials have indicated that current monetary policy is appropriate and no change is expected from the ECB at Thursday's meeting. USD price traction remains closely tied to speculation about the outlook for the US and global recovery. Data that raises recovery hopes is negative for the USD. Data that dampens optimism about the recovery tends to support the USD.

Today’s US data:

ADP June non farm payrolls was reported at -473k versus a downwardly revised -485k in May. A reading of -393k was expected for the June ADP report. The ADP report suggests that Thursday's US nonfarm payroll report is likely to show little improvement. The ADP private sector job losses were the smallest since October. The ADP report does not consistently correlate with the US government employment report and we would not read too much into the implications of today's ADP report. May construction spending declined 0.9%, a reading of -0.5% was expected. June ISM manufacturing index came in at 44.8, a reading of 44 was expected. May pending home sales rose 1%.

Upcoming US data:

On July 2nd initial jobless claims for the week ending 6/26 will rereleased expected at 610k compared to 627k last week. On July 2nd June nonfarm payrolls and unemployment will be released. The nonfarm payrolls are expected at -368k from -345k and the unemployment rate is expected to rise to 9.6% from 9.4% last month. May factory orders will also be released on July 2 nd expected to rise 0.1%.