US holiday today could see markets grind to a halt

Good morning

A US nonfarm headline of +57k and a revision downward of previous months data yesterday disappointed the markets enough to send USD lower, with GBPUSD reaching 1.3380 and EURUSD 1.1470 through the afternoon.  The headline was more disappointing given there had been a thought that the world cup would generate firmer employment.  The market ignored the better than expected unemployment rate that ticked down to 4.2%, the general feeling suppose is that the softer headline could be enough to persuade the Fed to avoid rate rises in the coming months. 

GBP continued to enjoy its push higher against EUR, reaching 1.1700 at one stage as the market digested the news that we shouldn’t be expecting any rate cuts from BoE any time soon, while also pricing down chances of further ECB rate rises.  In the crosses GBP is 1.9250, 2.3355 and 215.00 against AUD, NZD and JPY.

We saw a couple of sharp dips in USDJPY yesterday, one I reported in the morning report, the other came a little later in the afternoon which took the pair from 161.60 to 160.65.  This morning we have seen a simllar move that took USDJPY from around 161.00 to 160.50.  Once again, it wasn’t the largest move but served as a reminder of the risks of going long USDJPY amid intervention threats.  If this was official action I think its pretty well timed, putting a stop to the relentless Yen depreciation, at least for the time being. 

As you know I had thought they would use the US holidays and the reduced liquidity to help the impact of their USD selling, difficukt to know if I’m right or if its just a bit of profit taking ahead of the weekend.  Worth noting that Reuters reported Japan are changing ther intervention methods, reducing the verbal warnings in order to inflict maximum surprise on the markets when they do decide to take action.

Not a great deal on the calendar today although Lagarde and Bailey speak through the day.  It is a US holiday today so expect things to really slow down as we head into the afternoon.  As we look ahead to the weekend the weather is getting warmer and then hits highs of 30°c as we move into next week.  If its too warm for you outside there is plenty of sport to enjoy on the TV including the British F1 grand prix, tennis from Wimbledon, cricket with England taking on India in a T20, the Tour de France and international rugby with England taking on South Africa on Saturday afternoon.

All that is besides the world cup, where the last matches in the round of 32 wqill be played and then straight into the last 16 on Saturday when Canada takes on Morocoo and Paraguay face a formidible France.  In the very early hours of Monday morning, England will take on Mexico.  England are arriving in Mexico a couple of days ahead of the match, not sure that’s enough time to get them used to the altitude there but they’ll do what they can.  The England team hotel is being kept a secret after Ecuador complained their players were kept awake by constant loud music and fireworks set off by Mexican fans.  Not much chance of that location being kept secret, I’d imagine.

It will be a tough match for England and a tough  one for the fans as well.  If the match goes to extra time and penalties we may not get to bed until 4am, so expect a few bleary eyes in the office on Monday.  It’s possibly worse for me.  I’m off to Paris for a couple of days, I’m getting picked up from here at 4am Monday morning which means there is a chance I’ll get little or no sleep.  Even a nap on the Eurostar won’t be great given its such a quick service.  And if you think of complaining about the heat, just remember i’ll be facing 35°c temperatures while wandering around Paris.  It’s a tough life!

I am not back until late on Wednesday so don’t exect any reports until Thursday.  I’m adding the calendar for the start of the week here, its not the busiest week but we do have the RBNZ rate announcement in the early hours of Wednesday morning.  It is thought they will raise rates 25bps to 2.5% after the last RBNZ meeting which surprised with a far more hawkish tone than exepcted, backed up by several comments from RBNZs Breman since.  Current levels for NZD are 2.3355, 1.2135 and 0.5720 agaisnt GBP, AUD and USD respectively.

Have a great day, and a great weekend as and when it come.  

-  09.00 ECBs Lagarde speaks

-  09.00 EU composite PMI

-  15.30 ECBs Nagel speaks

-  16.00 BoEs Bailey speaks

Monday

-  10.00 EU retail sales, PPI

-  14.45 US S&P composite PMI

-  15.00 US ISM servies PMI

Tuesday

-  10.30 UK BoE financial stability report

-  15.00 CAD Ivey PMI

Wednesday

-  03.00 RBNZ rate announcement

-  19.00 FOMC minutes