USD

It’s been a volatile day for the US Dollar to kick off the month.  The Dollar Index is modestly lower this morning as traders digest several US and European data releases.

In the week ending May 27th, the number of Americans filing for unemployment benefits increased slightly to 232K, the highest level in a month but still below market expectations.  Meanwhile, nonfarm labor productivity declined by 2.1% in Q1, surpassing market expectations of a 2.5% drop.

Meanwhile, private businesses in the US generated 278K jobs, surpassing expectations and outperforming the revised April figure of 291 K.  The services sector showed significant job growth, although there were job losses in specific sectors, such as financial activities, education, and health.

Later this morning, US PMI numbers for May are also set for release, with the ISM Manufacturing PMI the most anticipated as markets expect the US manufacturing sector to contract for the seventh-straight month.   

EUR

After posting a loss of nearly 0.4% yesterday, the Euro is up around 0.15% heading into the US session after multiple data releases in Europe and the US. Eurozone inflation eased to 6.1% in May, its lowest level since February 2022. 

Declining energy prices and slower cost pressures for various goods and services drove the decrease. The core inflation rate also eased more than expected to 5.3%.

Meanwhile, the Euro Area’s labor market remained strong, with the unemployment rate reaching a record low of 6.5% in April and the number of unemployed individuals dropping to the lowest since 1995.

In addition, the Eurozone’s economic sentiment indicator declined to 96.5, hitting its lowest level since November 2022 due to a stagnant economy, high inflation, and rising interest rates.

GBP

The Pound is up around 0.3% today after posting four-consecutive days of gains dating back to last Friday as markets digest new UK data while monitoring the incoming US releases.

The UK manufacturing sector experienced a contraction in May, as the S&P Global / CIPS UK Manufacturing PMI came in at 47.5, slightly better than the preliminary estimate of 46.9.  Weak domestic market sentiment, lower new export orders, and client destocking impacted manufacturers, offsetting the benefits of improved supply chains. 

However, there was some positive news on the cost front, as average input prices decreased for the first time in over three years.

The housing market also faced challenges, as prices dropped by 3.4% year-on-year in May, the most significant decline since July 2009, attributed to rising interest rates and inflationary pressures.

JPY

The Yen is slightly higher this morning after closing May down over 2.2% - its third month of significant losses out of the past four, prompting emergency discussions from the Japanese government and BoJ to help prop up its faltering currency.

On the data front, Japan’s manufacturing sector experienced growth in May, with the recent Manufacturing PMI coming in at 50.6, indicating the first expansion since October 2022.  The recovery was driven by improved domestic economic conditions, increasing output and new orders.  However, employment growth was modest, and foreign sales, particularly to China, declined. 

On the inflation side, input prices were the lowest since April 2021, while output prices rose modestly.  In addition, business sentiment reached a 16-month high, reflecting some optimism for further economic recovery.

CAD

The Loonie is back in the green this morning, driven mainly by moves in the US Dollar.  The move comes a day after Canada posted stronger-than-expected economic growth in Q1, raising expectations for a potential interest rate hike by the BoC, with markets now pricing in a roughly 40% chance of a hike at next week’s meeting.

Later this morning, Canada manufacturing data for May is set for release, with markets expecting a contraction in the sector after showing growth in April.

 

Meanwhile, oil prices have found a bottom for now, with WTI up around 0.5% this morning after posting two-straight days of heavy losses earlier in the week.  After falling another 7% in May, its seventh straight month of declines, WTI is now down over 15% on the year – making life difficult on the commodity-linked Loonie.

MXN

The Mexican Peso is up over 0.3% on the day after the release of fresh US jobs data this morning and yesterday’s comments from Banxico Governor Rodríguez. 

Rodríguez stated that it is premature to consider lowering interest rates, as the Bank seeks concrete evidence of sustained, falling inflation before they contemplate rate cuts.  Despite concluding a two-year tightening cycle and maintaining the rates at 11.25% in their last meeting, Rodríguez emphasized that the current rate is here to stay for an extended period, ruling out a cut during the upcoming June meeting.

Looking ahead, April Jobless Claims data for Mexico is on deck tomorrow, with expectations of a slight increase to 2.7% after a 2.4% read in March.   

BRL

The Brazilian Real is clinging to modest gains this morning after briefly hitting a two-month low yesterday and closing May down over 1% against the Greenback – its first losing month since February.

It’s been a busy week on Brazil’s economic calendar, headlined by GDP numbers earlier this morning showing the Brazilian economy rebounded in Q1, growing by 1.9 percent and surpassing market expectations, primarily driven by a surge in agricultural output.  However, despite the growth, job creation in April fell short of expectations, with 180K jobs added, as markets brace for a slower labor market later in the year due to increased borrowing costs.

Meanwhile, the May manufacturing PMI came in at 47.1, beating market estimates of 45.6 but still well in contraction territory for the third straight month.  

CNY

The Yuan is mostly unchanged on the day after posting a dismal 2.8% loss in May in the offshore market. 

However, CNY has come off yesterday’s lows after an unexpected rebound in Chinese factory activity and hints from Fed officials that they may hold rates at the June meeting.

Surprisingly, the Caixin China General Manufacturing PMI rose to 50.9 in May from 49.5 in April, primarily due to increased output, new orders, and foreign sales. Nevertheless, there was a notable decline in employment, decreased backlogs, and slower growth in buying activity. The overall sentiment declined to a seven-month low, highlighting concerns regarding ongoing uncertainty surrounding China’s economy.