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  • richard evans

Softer US ISM sends USD lower, but watch comments from Fed officials

Good morning

 

I’ll begin by offering my apologies for the lack of report yesterday.  I seem to have a knack at the moment of picking up anything unpleasant going around, this time it was a 24-hour stomach bug which I have to say was hugely unpleasant and although I am vastly improved this morning, I’m still on the delicate side. 

 

So, what did I miss?  Well quite a lot by the look of it.  Tuesday morning I’d written that GBPUSD was down to 1.2540 and EURUSD to 1.0730, each are now over 100 pips higher at 1.2660 and 1.0850 respectively.  This bout of USD weakness comes despite a decent ADP number out of the States yesterday, instead the market paid more attention to the ISM services number which, although still above 50 and therefore indicating expansion, came in below expectations. 

 

In addition, Feds Powell was speaking, his comments also added to USD weakness, suggesting that rate cuts this year are still on the agenda, although I have to say I thought he did his best to warn rate cuts may not be seen as early as we hope, making it clear Fed will hold off cutting rates until there are clearer signs of lower inflation.  I think he is preparing us for the possibility that unless data between now and June is softer, they won’t be cutting rates.  The market seems to have overlooked this.  

We have a host of Fed officials speaking through the afternoon, my guess is they will all talk about potential for rate cuts this year but I will look for any signs that they are thinking June could be too early. 

 

We have the next round of US jobs data this afternoon, in the form of US challenger and initial jobless claims, ahead of tomorrows all-important nonfarm payrolls.   

 

USDJPY has failed to capitalise on US weakness, it remains stuck in the high 151’s.  Before yesterdays US ISM number it came within a couple of pips of 152.00 but did get dragged a little lower on the release.  Currently 151.70, support seems to be noted around the 151.50 area and of course 152.00 is capping the upside.  This leaves GBPJPY up at 192.15.

 

Gold prices meanwhile have certainly taken advantage of the USD weakness as well as rising geopolitical risks, trading briefly above $2,300 overnight and although it really was brief, we are currently sitting at $2,297, the pullback being rather shallow.  Oil prices have also benefitted from the geopolitical situation, US WTI hit $86.00 yesterday, while Brent traded to almost $90.00, both the highest levels since October last year which followed the terror attacks in Israel.

 

In sport, Arsenal have regained top spot in the Premier league with a win over Luton yesterday, Man City did both themselves and Spurs a favour in beating Aston Villa.  Arsenal’s reign could be short-lived, Liverpool can regain top spot with a win at Sheffield Utd this evening.  Meanwhile a win this evening for Chelsea over Man Utd would put them within touching distance of the European places.

 

That’s all for now, EU and UK PMIs up this morning, anything better than expected could see gains against USD continue.

 

-  09.00 EU services PMI

-  09.30 UK services PMI

-  10.00 EU PPI

-  12.30 ECB minutes

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  13.30 Feds Harker speaks

-  17.15 Feds Barkin speaks

-  17.45 Feds Goolsbee speaks

-  19.00 Feds Kashkari, Mester speak

-  00.30 Feds Kugler speaks

-  00.30 AUS trade balance

 

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