Morning brief for June 2
Today’s news headline is that Trump officially announced the withdrawal of the US from the Paris climate agreement. The President considered the deal a burden and unfair to the US and said he would welcome renegotiation with the other countries. The German, Italian and French governments all reacted immediately to Trump’s announcement putting out a joint statement saying they “take note with regret” of Trump’s decision. The UK Theresa May took some time before saying anything on this subject. Her reluctance to come down stronger on Trump may be explained by looming Brexit negotiations. She tries to distance herself from the European countries and make friends with the US. The market’s reaction was subdued. Us equities moved higher on Trump’s announcement, while oil futures dropped.
The US dollar regained its strength in the past session due to strong economic data flowing from the country. Yesterday, we got a bunch of releases out of the US. ADP private sector employment increased by 253K vs forecasted estimate of 181K. The ADP is expected to mirror the official non-farm employment data. But we must admit that the correlation is not always great but the print with 253K, 200K, 180K or even 120 K are all good for the market to think the Fed will raise its interest rate on June 14th. The US jobless claims came at 248K. This was higher than the consensus estimate, but in general it didn’t change the trend. The ISM Manufacturing employment component was also very strong.
Today’s focus will be on the US labor market report consisting of average hourly earnings, NFP and jobless rate data. It will be release at 3:30 pm MT time.
The euro moved lower to 1.1225 from 1.2569 in Tokyo morning due to widespread strengthening of the USD. The outlook is still neutral, it may change to bullish one if EUR/USD breaks 1.3000.
Sterling is still pressured by the upcoming UK general election scheduled for June 8. At the present moment, the pair is hovering around 1.2850. We will be bearish on GBP only if it slide below 1.2755 – 1.2760 levels. Today, we will receive construction PMI out of the UK.
Australian dollar slumped to 0.7395 in the Asian session. National Australia Bank posted a note on their forecast of the first quarter GDP data which is due on Wednesday 7 June. Economic partials point to a modest contraction in real GDP. Earlier this week we released CAPEX report that contained decreasing spending on plant and equipment (the essential element of the GDP gauge). In the upcoming session, we will be waiting for a further slide towards the supports at 0.7355 or lower, towards 0.7330.
USD/CAD moved a little bit higher on the session and almost hit 1.3460 level on the stronger greenback and falling oil prices. Today we release trade balance and labor productivity data out of Canada.
Brent oil futures dropped below $50.30 in the past sessions after the US President Trump announced that the US would leave the Paris Climate Accord. The might instigate the growth of the American oil industry which in turn will complicate OPEC’s production cut projections.