Wednesday was a huge day in the currency markets. This is the change that was triggered by the very disappointing US ADP employment numbers for May. Today’s jobs report showed a net gain of just 37,000 jobs, well below the 115,000 that was expected. The surprise retreat has set off major changes in the currency trading world. It especially hits the Euro and the British Pound, all in the context of a weakening US Dollar.
The EUR/USD pair showed relative strength, trading around the 1.1400 level after the negative ADP release. Traders were quick to react to this data, as the pair found clear support in this area and the Euro was favored in this cross. For a brief period, the mood on Wall Street changed completely. This administrative change comes in response to growing worries that the US labor market is hurting our growth potential.
At the same time the GBP/USD cross climbed towards 1.3530 area, supported by the weakening US Dollar’s strength. Following the release of the US employment data, GBP/USD was able to find some footing around this level. As a result investors became more bullish on the Pound. The disappointment in the ADP numbers also helped improve these fortunes for the British currency.
In commodity markets Commodities Gold prices held firm, trading in a consolidative mood around the $3,350 per ounce level. Gold was indeed helped by the bearish sentiment of the Greenback. Investors overreacted to Friday market expectations over a possible trade-war thawing phone call between former President Trump and Chinese President Xi. Despite these factors, Gold appeared sidelined as traders awaited further clarity on economic indicators.
The Australian Dollar (AUD) struggled on Wednesday, continuing to trade defensively against the US Dollar (USD). The AUD/USD cross is unable to hold the breakout, even as it whipsawed into positive territory on mixed economic data out of Australia. The US Dollar was able to maintain its strength ahead of ISM Services PMI news. Yet this stability has made traders skittish about the Australian dollar.
The Bank of Canada (BoC) makes an anticipated decision to pause its withdrawal of stimulative monetary policy. We expect it to hold at 2.75% at next week’s FOMC meeting. While the agency has made similar decisions to pause the rule in March and April, it mirrors the increasing concerns over inflation and still lingering effects of the US’s trade war. The BoC’s pivot is indicative of a more cautious stance as the bank weathers global economic turmoil and financial markets.