The Aussie and Kiwi dollars are sharply lower on USD strength following stronger-than-expected U.S. economic data that supports the idea that the Federal Reserve could soon signal a pull back on monetary support.
Particularly for NZD, that would reduce any expected yield advantage if central banks are effectively tightening policy broadly in concert.
AUD/USD is down 1.2% at 0.766 and NZD/USD is 1.3% lower at 0.7145. “It’s mostly been a story of a stronger USD,” says ASB Bank.
The prospect of a super-charged U.S. economic recovery means “markets are growing increasingly convinced the Fed will soon start to talk more readily about tapering its asset-buying programme.” NZD/USD technical supports are at 0.7130, 0.7100 and 0.6940.
The Trading day ended with a very strong ⬆️USD as we have discussed yesterday following our daily routine check.
👉 U.S. Jobless Claims Down 20K to 385K in May 29 Week
👉 U.S. Services Sector Growth Accelerates in May Amid Economic Reopening
👉 U.S. Private Sector Job Creation Accelerated Sharply in May
AUD/USD Could Drop to 0.7600 After Range Breakout
With AUD/USD having broken below the 0.7700-0.7800 range that had contained it for the past six weeks, Westpac sees the potential for it to fall toward 0.7600 over the next few sessions.
The main data point in Australia today is April housing finance approvals. Westpac forecasts a 3.0% rise in approvals, with a further decline in construction-related finance associated with the federal HomeBuilder scheme more than offset by an uplift in investor lending.
“The wider picture on established housing markets remains positive with both sales volumes and prices sustaining strong gains through April and May,” Westpac says.
Meanwhile, the dollar index, which tracks the greenback versus a basket of six other currencies, rose 0.574 points or 0.64 percent, to 90.483 after falling 2% in April and a further 1.6% in May.
A better-than-expected U.S. weekly unemployment report and private payrolls numbers for May pointed to strengthening conditions in the labor market, while a measure of service sector activity increased to a record high, pointing to a robust economic rebound.
The strong data could force the Federal Reserve to pare back its crisis support sooner than expected, despite central bank officials’ reassurances to the contrary.
#DailyBrief | Things traders need to know today:
Friday, June 4, 2021
🏦 US stocks declined Thursday despite strong economic data. The private sector added 978K new jobs in May and weekly jobless claims dropped to the lowest since the pandemic, with the service sector expanding at a record pace. European indices closed in red while the Australian benchmark hit another fresh high.
👨🦳 President Joe Biden signed an executive order Thursday banning Americans from investing in 59 Chinese firms believed to be linked to China’s military, expanding an earlier Trump administration order. The original order, signed by President Donald Trump in November, applied to 31 Chinese companies that the administration said “enable the development and modernization” of China’s military and “directly threaten” US security.
🇺🇸 Regarding U.S. economic data, the latest initial jobless claims fell further to 385,000, fewer than 387,000 expected. The ADP jobs report showed that the economy added 978,000 private jobs in May, more than an addition of 650,000 jobs expected. The Markit U.S. Services PMI was finalized at 70.4 for May (vs. preliminary reading 70.1). The ISM Services Index rose to 64.0 for May (63.2 expected). The U.S. Labor Department will release its official jobs report for May later today, and it is expected that 674,000 nonfarm payrolls were added and the jobless rate declined to 5.9%.
💵 The US dollar index (USDX) surged to a three-week high of 90.46, while the yield on 10-year Treasury was above 1.62%. Investors worried that better-than-expected US data could lead to FED tapering discussion soon.
💶 EUR slumped for a third consecutive day to 1.2127 amid the USD recovery. The Markit Eurozone Services PMI was finalized at 55.2 for May (vs. preliminary reading 55.1).
🇯🇵 USDJPY closed above 110 for the first time since April.
🇬🇧 GBP dipped to 1.4101 on concerns of rising Covid cases in the UK. The final release of the services PMI was slightly higher.
🇦🇺 Commodity-linked currencies took the hit most, with AUD falling to 0.7660 (-1.17%)
🇳🇿 NZD lower at 0.7144 (-1.26%).
🇨🇦 USDCAD was back above 1.21, sitting above the 5-day EMA.
💰 Gold plunged nearly 2% to 1870.53 ahead of the non-farm payroll.
🛢 U.S. WTI crude futures closed flat at $68.93 a barrel. The U.S. Department of Energy reported a reduction in crude-oil stockpiles of 5.079 million barrels, compared with a reduction of 2.409 million barrels expected.
🥇 Bitcoin advanced over 4% to levels over $39,000, and Ether charged over 5% to $2,850.
