USD

Jobless claims and Non-Farm Payroll are the two numbers that traders are focusing on this morning, as today marks the end of the shortened workweek.  U.S. markets will be closed on Friday for the July Fourth holiday. Yesterday’s release of ISM PMI for June was much better than expected as the overall index rose into expansion territory at 52.6 from 43.1 in May, and beat the forecast of 49.5. New Orders rose to 56.4 from 31.8 in May, more than doubling the April low of 27.1. This was the largest one month and two month gain in the 72-year history of the PMI series. But the continuing outbreak of new coronavirus cases is casting a large shadow over these numbers. At least 12 states have paused or pulled back on their re-opening schedules. Americans seem ready to return to normal, but the second wave of the pandemic is dictating a new normal. Non-Farm Payrolls for June rose by 4.8 million and the unemployment rate fell to 11.1% as the U.S. continued its reopening from the coronavirus pandemic, according to statistics released by the Labor Department this morning. Economists who were surveyed by Dow Jones had been expecting a 3 million increase in jobs and a jobless rate of 12.4%. The report was put out this morning, a day early due to the July Fourth U.S. holiday. DOW Futures moved more than 400 hundred points higher after the release of the news. On a slightly negative note, US weekly jobless claims came in at 1.427 million, a little higher than the 1.38 million expected. As the DOW is primed for a good week ending trading day, the USD is trading lower against the major currencies as risk-on is once again the trading mantra.

EUR

EUR/USD is trading higher this morning, moving above the uptrend resistance line as optimism about a virus vaccine as outweighed virus concerns. Pfizer and BioNTech are reporting promising results from their trials of Covid-19 vaccines. The Eurozone unemployment rate rose to 7.4% in May, slightly lower than expected. European Commission President Ursula von der Leyen is slated to hold meetings regarding the EU recovery fund next week on July 8. EU leaders are scheduled to meet on July 17th and 18th and this summit will include discussions on the EU long-term budget as well as any recovery package. Technically, the EUR remains in a bullish mode and a break of the weekly high should see continued buying. Traders are looking at the moves by the EU in re-opening the economy in a positive vein, as Europe seems to have been successful in mitigating the disease. Europe has opened its doors to visitors from outside the Eurozone, although the US remains on the restricted list.  Positive economic releases from the US this morning will be equity positive and USD negative, so the EUR should remain well bid.

GBP

GBP/USD is trading higher this morning near the overnight highs as traders seem to be shrugging off concerns over Brexit as well as the UK coronavirus situation. Technically, the pound has broken through significant resistance levels and is trading above the moving averages. The potential for a virus vaccine is also helping sterling trade higher. A report in today’s Daily Telegraph stated that the UK will be introducing a “quarantine exemption” list of as many as 75 countries that would allow British citizens to get a chance at a summer holiday. Tensions could arise between the UK and China in the coming days as China has warned the UK of “consequences” if it interferes with the affairs concerning Hong Kong. The following comments were made overnight; “Britain would bear all consequences for any move it took to offer Hong Kong citizens a path to settlement in the UK and China reserves the right to act against Britain over the issue.” This is a situation to watch in the next few days. 

JPY

USD/JPY is trading in a quiet range overnight as demand eased over safe haven being of the Japanese currency. The positive vaccine news has traders improving their global risk sentiments as markets await the US jobs report. Technically, the USD/JPY is trading right around the 50-day moving average and below the 100 and 200-day averages. As usual, markets seem to have come to a standstill ahead of the US data releases. The release yesterday of the Tankan numbers showed the Japanese economy still has a long way to go to recover. At the moment, it seems traders have put aside US-China tensions which can flare up at any moment. 

CAD

USD/CAD is higher this morning as oil prices once again determine the direction of the “loonie”. As traders return from their Canada Day holiday, they find oil prices lower as concerns over demand are being fueled by a surge in US coronavirus cases. Brent crude futures were $0.06 lower at $41.97 per barrel after rising almost 2% during the previous day’s trading. U.S. West Texas Intermediate crude futures fell $0.10 to $39.72 per barrel after rising 1.4% yesterday. As the US recorded their biggest one-day spike in coronavirus cases and California re-imposed some lockdown measures, traders feel there could be a stall in economic recovery and therefore fuel demand. Technically, the “loonie” could not build on the strength gained from previous sessions and for the time being will continue to follow the oil prices.

CNY

The controversial Chinese security law was applied for the first time on Wednesday, prompting anger around the world. As already mentioned the UK stated they may allow immigration of millions of people from the city-state and the US is proceeding with economic sanctions. China’s Commerce Ministry made a statement overnight that they “resolutely oppose sanctions from the US on Hong Kong”, and “will continue to study new measures to support the Hong Kong economy.” At the present time, Hong Kong’s financial market is working as usual with money flowing into the financial hub. India has come out with a ban on Chinese apps and the ministry also stated that “China has not adopted any restrictive or discriminatory measures against Indian products and hopes that India will correct their actions against Chinese companies immediately.” The tension between the Chinese and Indian governments seems to be “flying under the radar” at the moment but does bear watching.